The US Securities and Exchange Commission (SEC) has greenlit a leveraged exchange-traded fund linked to the SUI token from 21Shares, providing investors with heightened exposure to the Sui ecosystem amid ongoing concerns about leverage risks in cryptocurrency markets.
On Thursday, the Sui Foundation declared that 21Shares has introduced its 2x leveraged SUI (SUI) ETF, listed under the ticker TXXS on Nasdaq. The fund aims to yield twice the daily return of SUI, offering a means for investors to achieve leveraged exposure without directly owning the cryptocurrency.
In practical terms, if SUI surges by 10% in a day, the ETF strives to increase by approximately 20%. Conversely, losses are equally emphasized on the downside.
Instead of holding SUI tokens, the fund employs derivatives, such as swaps and various financial contracts, to mirror the price movements of the token.
Until now, the SEC has been cautious about approving higher-leverage crypto investment products. In October, the regulator stated it was “unclear” if the proposed three-times and five-times leveraged ETFs would fulfill regulatory standards.
Earlier this week, the agency also sent out a series of warning letters to fund issuers, advising against products that offer such high levels of leverage across stocks, commodities, or digital assets.
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The ongoing debate over crypto leverage
The discussion regarding limiting excessive leverage is particularly pertinent in the cryptocurrency sector, where the heavy use of borrowed funds continues to magnify price fluctuations and sometimes lead to significant losses for traders.
On Oct. 10, the crypto market experienced its most substantial leverage-driven sell-off recorded, liquidating approximately $19 billion worth of positions as prices plummeted and forced highly leveraged traders out of their positions.
The repercussions extended beyond leveraged traders to spot investors, who witnessed the value of their assets decline in the weeks that followed. Bitcoin (BTC), for instance, fell from a historic high near $126,000 in October to under $80,000 in November.
Leverage plays a considerably larger role in cryptocurrency markets compared to traditional markets, primarily due to the prevalent use of derivatives exchanges and perpetual futures contracts.
Platforms like Binance and Bybit enable traders to take on highly leveraged positions—often 10x, 50x, or more—on perpetual futures, which are contracts tracking an asset’s price without expiration.
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