The US Securities and Exchange Commission (SEC) has authorized a leveraged exchange-traded fund linked to the SUI token from 21Shares, granting investors the opportunity for amplified exposure to the Sui ecosystem amid ongoing concerns about leverage risks in crypto markets.
On Thursday, the Sui Foundation announced that 21Shares has introduced its 2x leveraged SUI (SUI) ETF, which trades under the ticker TXXS on the Nasdaq. This fund is designed to deliver double the daily return of SUI, offering investors a method to gain leveraged exposure without the need to directly own the cryptocurrency.
In practical terms, if SUI increases by 10% in a single day, the ETF targets an approximately 20% increase. Conversely, losses are proportionally amplified on the downside.
Instead of holding SUI tokens directly, the fund employs derivatives, such as swaps and other financial contracts, to monitor the price movements of the token.
Historically, the SEC has hesitated to endorse higher-leverage crypto investment vehicles. In October, the regulator stated it was “unclear” whether the proposed three-times and five-times leveraged ETFs could adhere to regulatory criteria.
Earlier this week, the agency also sent a series of warning letters to fund issuers, advising against products that provide such high levels of leverage across stocks, commodities, or digital assets.
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The ongoing debate over crypto leverage
The discussion regarding the limitation of excessive leverage is particularly important in the cryptocurrency space, where significant reliance on borrowed funds continues to intensify price volatility and occasionally lead to substantial losses for traders.
On Oct. 10, the crypto market experienced its largest leverage-induced sell-off ever, with approximately $19 billion worth of positions liquidated as prices plummeted rapidly, forcing highly leveraged traders out of their positions.
This impact extended to spot investors as well, causing their holdings’ value to decline in the subsequent weeks. Bitcoin (BTC), for instance, dropped from a record high near $126,000 in October to below $80,000 in November.
Leverage is significantly more prevalent in crypto markets compared to traditional markets, mainly due to the extensive use of derivatives exchanges and perpetual futures contracts.
Platforms such as Binance and Bybit permit traders to take highly leveraged positions — often 10x, 50x, or beyond — on so-called perpetual futures, which are contracts that track an asset’s price indefinitely.
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