Cboe pushes for 3x Bitcoin and Ethereum ETFs after 2x crypto funds suffer losses of up to 96%

Cboe Global Markets is doubling down on a risky hand. Despite the carnage we have seen in leveraged crypto products lately, they have filed for rule changes to list and trade 3x leveraged Bitcoin and Ethereum ETFs. This move comes at a time when the existing 2x products are performing so poorly that they are functionally indistinguishable from a total loss for many holders.

The Math of a Wipeout

Before we talk about the new filings, we have to look at the wreckage of the current market. The data coming out for 2x leveraged Ethereum funds is grim. One specific fund, ETHU, reported an annualized Net Asset Value (NAV) return of negative 96.15% through the end of June. That is not just a bad quarter; that is a near-total destruction of capital.

For those of us building in this space, we know that volatility is the price of admission. But these leveraged products do not just track the price of the asset; they amplify the volatility decay. When you are leveraged 2x or 3x, a few days of choppy sideways trading or a sharp spike followed by a correction can bleed the fund dry even if the underlying asset eventually returns to its original price. It is a mathematical trap that retail investors rarely understand until their account balance hits zero.

Why Cboe is Pushing Now

You might wonder why a major exchange would want to offer even more leverage when the 2x funds are already failing so spectacularly. The answer is simple: volume and fees. Exchanges like Cboe thrive on activity. In a market where spot ETFs have become somewhat commoditized, high-leverage products are the shiny new toys that attract degenerate traders and institutional hedgers looking for short-term plays.

But as a founder, I see this as a step backward for the perceived maturity of the industry. We spent years trying to convince regulators that crypto is a legitimate asset class, only to immediately pivot to offering products that resemble a high-stakes casino. The filing asks for a change to the rules that would allow these 3x products to bypass some of the standard hurdles, essentially fast-tracking the ability for people to lose money three times faster.

The Builder’s Perspective

If you are building an application or a protocol, these ETFs might seem like they are in a different universe. They aren't. Every time a high-profile crypto product collapses or wipes out thousands of retail users, the regulatory shadow grows longer. It makes it harder to get banking, harder to get insurance, and harder to convince the average person that crypto is more than just a giant gambling den.

Leverage is a tool, but in the hands of the public through an ETF wrapper, it becomes a weapon. We should be focusing on building utility and sustainable yield, not finding new ways to squeeze 300% volatility out of a 24/7 market that is already the most volatile on the planet.

The Downward Spiral of NAV

The reported -96% figure for the 2x ETH fund is a warning shot. When a fund loses that much value, it rarely recovers because it needs a 2,500% gain just to get back to break-even. By launching 3x products, the industry is creating instruments where a 33% drop in the underlying asset—something Bitcoin does in its sleep—results in a total 100% loss of the fund's value in a single rebalancing period.

• 3x products are designed for day trading, not holding.
• Volatility decay makes long-term success statistically improbable.
• Institutional providers are prioritizing fee generation over investor safety.

What This Means for the Market

If these 3x ETFs are approved, we will see a temporary surge in headlines and perhaps a bit of liquidity. But the long-term impact is likely a series of catastrophic liquidations that will lead to more congressional hearings and more restrictive laws for those of us actually trying to write code and ship products. It is the classic struggle in crypto: the clash between the people building the future and the people trying to scalp the present.

I am not against risk. I am a founder; my entire life is risk. But I am against the packaging of extreme financial hazards as accessible investment products for the masses. Cboe is pushing for this because they want the trade flow, but we need to be honest about what these products are: they are not investments. They are high-velocity exit liquidity for the sophisticated players at the expense of everyone else.

The industry needs to decide if it wants to be a pillar of the new financial system or just a faster way to go broke. Currently, the push for 3x leverage suggests we are leaning toward the latter.

We need to stop cheering for every new ETF filing as if it is a win for adoption. True adoption is when people use these assets to solve real-world problems. A 3x Ethereum ETF solves zero problems; it only creates new ones for the regulators to fix later. If you're building in this space, ignore the noise of these derivative products and stay focused on the underlying tech. The volatility will always be there, but the real value is in what we build, not how much we can gamble on the daily candle.

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