Tuttle Capital Management filed the first of 10 leveraged crypto ETFs to the U.S. SEC on Monday. These proposed specific ETFs seek to provide investors with double (2x) the price return of the corresponding cryptocurrencies including XRP, Solana (SOL), Litecoin (LTC), Cardano (ADA), Chainlink (LINK), Polkadot (DOT), Binance Coin (BNP), Bonk (BONK), TRUMP & MELANIA memecoins.
These also include ETFs linked to the memecoins that have drawn inspiration from former President Donald Trump and First Lady Melania Trump.
This would be a first for ETFs proposed for Chainlink, Cardano, Polkadot, and Melania’s coin, in particular, noted Bloomberg Intelligence analyst James Seyffart.
Leveraged ETFs are intended to increase daily returns by using financial instruments such as derivatives and debt. But they carry major risks. The filing warns investors that their entire investment could be lost if the underlying cryptocurrencies fall dramatically. For example, a 50% move in a single day can wipe out the whole principal.
“Using leverage amplifies returns but also magnifies losses,” the filing says. Such violent drops are par for the course for altcoin markets, with 10% crashes not unusual in turbulent times, a 20% loss for these leveraged ETFs before fees, in other words.
The response from the SEC will be critical in determining the destiny of these ETFs. Eric Balchunas, an ETF analyst at Bloomberg, noted that the filing is made under the Investment Company Act of 1940, or what is commonly referred to as a “40 Act” filing, meaning that, in theory, the ETFs could start trading as early as April unless the SEC explicitly blocks them.
“This is a case of issuers testing the limits of what this SEC is going to allow,” Seyffart said. “I’m expecting the new crypto task force led by Hester Peirce to likely be the lynchpin in determining what’s gonna be allowed vs what isn’t.”
This proposal adds to a trend of ETF applications becoming bolder. Last week alone, Osprey and Rex Shares submitted applications for non-leveraged ETFs that would track Trump’s memecoin, XRP, and more.
In another case, Tuttle Capital drew attention earlier this year when it launched ETFs that would provide -200% inverse exposure, and 200% leveraged exposure to MicroStrategy, the company that directly has the most Bitcoin of any corp across the globe.
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