Jun 10, 2024 - Economy

👯‍♀️ 2X ether ETFs want to double your return

Illustration of the Ethereum logo running through finish line tape.

Illustration: Lindsey Bailey/Axios

ProShares, the firm behind the largest futures-based bitcoin ETF, launched a pair of ether funds that aim to double daily returns on ether, whether the price goes up, or down.

Why it matters: These so-called leveraged ETFs beat the eight spot ether ETFs to market.

Zoom in: The ProShares Ultra Ether ETF (ETHT) and the ProShares UltraShort Ether ETF (ETHD), unlike the spot ether ETFs, do not directly invest in ether. They use derivatives.

  • ETHT is for the number-go-up folk. ETHD, for the number go down believers.

Between the lines: These things can juice returns, but can also cut them to ribbons, because of the cost of the strategy — what's called "decay" — that eats into those returns. (They can go very wrong in other ways.)

  • That's outlined in the risk disclosures of the ETF prospectuses.
  • There are lots of risks using leveraged ETFs, but there are even more for leveraged ether ETFs.

Think regulatory risk. If ether itself were deemed security, or, if the U.S. or any other country, "exerts regulatory authority over the Ethereum Network, ether trading or ownership in ether, the ether futures may be adversely affected," the leveraged ETF filings read.

💭 Our thought bubble: Pretty wild that these power tools are landing in investors' hands before any normal spot ETF does.

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