Defiance Eyes 3x Leveraged Crypto ETFs: A Risky Bet?

Defiance Doubles Down on Risk with 3x Leveraged Crypto ETFs

Defiance Investments, known for its risk-embracing ETFs, has filed with the SEC to launch 49 new funds offering three times leveraged and inverse leveraged exposure to various assets, including Bitcoin, Ethereum, Solana, crypto firms, and even gold.

What's Proposed?

The filings include plans for 3x leveraged and inverse ETFs targeting:

• Crypto giants like Coinbase (COIN)
• Bitcoin treasury holder MicroStrategy (MSTR)
• Brokerage Robinhood (HOOD)
• Ethereum miner BitMine Immersion
• Stablecoin issuer Circle (USDC)
• Grayscale's Bitcoin and Ethereum mini-trust ETFs
• Volatility Shares' Solana ETF

Defiance already offers 2x leveraged ETFs on stocks like MicroStrategy and Robinhood. However, 3x leveraged funds are significantly riskier and far less common.

The Risk Factor:

The prospectus emphasizes that these funds are not suitable for all investors, and for good reason. Leveraged ETFs amplify both gains and losses, potentially leading to significant losses if the underlying asset moves against the investor's position.

"Things are getting wild," - Bloomberg ETF Analyst James Seyffart

Industry Trends

Despite the risks, Defiance's proposal reflects a growing trend of issuers catering to investor demand for crypto-based financial products. LeverageShares and Themes Trust have also proposed 3x leveraged and inverse funds focused on COIN and HOOD.

The SEC is currently reviewing numerous ETF applications related to individual tokens, coin combinations, and diverse strategies. This activity follows the considerable success of spot Bitcoin and Ethereum ETFs, which collectively hold approximately $150 billion in assets.

Expert Opinion:

ETF.com Senior ETF Analyst Sumit Roy highlights the market's apprehension surrounding 3x leveraged funds and their limited target audience.

“The conventional wisdom was that the SEC was only going to allow 2X leverage going forward, but these filings suggest that it may be willing to allow more volatile products to hit the market,” - Sumit Roy

He cautions that these funds, if approved, would be exceptionally risky and intended for aggressive short-term traders only.

Key Takeaways:

• Defiance Investments proposes 3x leveraged crypto ETFs. High risk, high reward.
• The SEC is reviewing multiple crypto ETF proposals. Innovation or speculation?
• Experts warn of the dangers of 3x leverage for most investors. Proceed with extreme caution.