Why Were the Filings Halted?

The SEC highlighted that leverage above 2x could trigger frequent fund terminations and create significant market volatility. Balchunas added, “The analyst also stated that allowing leverage above 2x could result in frequent termination events and a highly unstable market scenario.” Rule 18f-4 caps the value-at-risk at 200% and requires derivative-based funds to continuously monitor their exposure.

Direxion’s leveraged crypto ETFs and high-beta equity products were specifically affected by this notice. The SEC also issued a warning covering single-stock and sector-based leveraged ETF filings. “This step is a critical measure to prevent unnecessary risk in the market,” experts commented.

Rising Applications and Investor Concerns

In October, SEC’s Investment Management Division director Brian Daly noted a sharp increase in filings for 3x and 5x leveraged ETFs. Daly said, “The agency has received a large number of registration statements for ETFs seeking to offer 3x and 5x leveraged, equity-linked exposure. It is still unclear whether such ETFs would be consistent with the Derivatives Rule, Rule 18f-4, which generally limits leverage to 2x.”

VolShares offered 5x leveraged products for SOL, Ethereum, and XRP, while GraniteShares submitted a 3x XRP ETF filing. Morningstar ETF researcher Bryan Armour noted, “More than half of leveraged ETFs launched over the past three years have closed,” highlighting the inherent risks. However, Armour also said the SEC has been relatively open to innovation and new strategies.

Key Takeaways

• Filings for 3x and 5x leveraged crypto ETFs have been halted.

• Rule 18f-4 limits value-at-risk to 200%.

• SEC instructed issuers to revise strategies or withdraw filings.

• Direxion, VolShares, and GraniteShares’ applications were affected.

• Leverage above 2x could increase fund terminations and market volatility.

SEC’s decision to halt 3x and 5x leveraged crypto ETF filings serves as a critical warning for investors. Analysts emphasize that products with leverage above 2x may face heightened market fluctuations and sudden fund liquidations. This development urges both institutional and retail investors to reassess risk management strategies. Additionally, regulations under Rule 18f-4 make long-term sustainability for high-leverage ETFs challenging. Investors should consider these new market dynamics and regulatory limits when planning their strategies.

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The post SEC Halts 3x and 5x Leveraged Crypto ETF Filings appeared first on Coin Engineer.

Regional Distribution of Institutional Investments

• United States: Led with $843 million in inflows.

• Germany: Recorded one of its largest weekly inflows on record at $502 million.

• Switzerland: Saw outflows of $359 million, primarily due to asset transfers between providers rather than actual selling pressure.

These figures clearly highlight which regions institutional investors are targeting for digital assets. The U.S. remains the largest liquidity hub.

Bitcoin: The Favorite of Institutional Investors

According to the weekly report, Bitcoin topped the charts with $931 million in inflows. Since the U.S. Federal Reserve began cutting interest rates, cumulative institutional inflows into Bitcoin have reached $9.4 billion. Year-to-date (YTD) inflows now stand at $30.2 billion, still below last year’s $41.6 billion.

This shows that institutional investors continue to view Bitcoin as a safe haven and long-term store of value.

Ethereum: Weekly Outflows

Ethereum experienced $169 million in outflows after five consecutive weeks of inflows. Although daily outflows were consistent throughout the week, 2x leveraged ETPs remain popular among institutional investors.

Solana and XRP: Cooling Ahead of ETF Launches

• Solana: $29.4 million inflows

• XRP: $84.3 million inflows

Both tokens saw a slowdown in inflows ahead of U.S. ETF launches, indicating that institutional investors are waiting for regulatory developments and upcoming product releases before adjusting their strategies.

Weekly and YTD Institutional Flows

This week, institutional investors clearly favored Bitcoin and other crypto assets, while inflows into XRP and multi-asset products were limited. Solana inflows remained modest, whereas Ethereum, Sui, and Cardano experienced net outflows.

Global ETP (Exchange Traded Products) trading volumes reached $39 billion this week, well above the YTD weekly average of $28 billion. This reflects active participation by institutional investors and ongoing interest in assets like Bitcoin and Ethereum.

Year-to-date, institutional investors have allocated $30.2 billion to Bitcoin, $14 billion to Ethereum, $2.8 billion to Solana, and $1.9 billion to XRP. These numbers suggest that institutions view Bitcoin and Ethereum as the cornerstones of their portfolios, while diversifying strategically across altcoins.

Investment Trends Among Institutional Investors

• Bitcoin remains the preferred choice, continuing to serve as a safe haven and liquidity vehicle.

• Short-term fluctuations are observed in Ethereum and some altcoins.

• Investors closely monitor ETF launches and regulatory updates, adjusting their strategies accordingly.

These trends provide valuable insight into institutional confidence in the crypto market and serve as an important indicator for retail investors seeking to understand market direction.

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SEC Filing Signals Serious Intent

On June 25, subsidiaries of global asset manager Invesco and crypto-native firm Galaxy filed a registration statement with the U.S. Securities and Exchange Commission (SEC) for the “Invesco Galaxy Solana ETF.”

If approved, the fund would trade on the Cboe BZX exchange under the ticker QSOL. Invesco Capital Management LLC is listed as the sponsor, with administrative duties assigned to the Bank of New York Mellon. Galaxy will manage token acquisition, and Coinbase Custody Trust Company will serve as the custodian for Solana.

Fierce Competition Around Solana ETFs

Other firms including VanEck, Bitwise, and 21Shares have also filed applications for Solana ETFs over the past year. The broader momentum follows the SEC’s approval of spot Bitcoin and Ethereum ETFs, after a pivotal court ruling during the Biden administration reshaped regulatory dynamics.

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Recently, the SEC requested issuers to update their S-1 filings for Solana ETF proposals—an indication that approvals may be on the horizon.

NFT Exposure in New ETF Formats

Also on June 25, Cboe BZX filed a Form 19b-4 for the Canary PENGU ETF. First proposed in March, the fund would include the Ethereum-based NFT project Pudgy Penguins’ PENGU token, along with other crypto assets.

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The post Invesco and Galaxy Join Growing Race for Solana ETF Approval appeared first on Coin Engineer.

According to the company’s statement, Bitwise experienced 10x growth in client assets under management in 2024, reaching a total of $12 billion.

Growth in Crypto Asset Management

Bitwise remains active in the digital asset fund space, offering Bitcoin and Ethereum exchange-traded funds (ETFs). The company has also filed to offer XRP and Solana ETFs. In addition, it provides crypto index funds and other investment solutions focused on the Web3 ecosystem.

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Crypto asset management firms help investors with risk management, portfolio balancing, and performance tracking. Among Bitwise’s competitors are Galaxy Asset Management and Grayscale, while traditional financial giants like BlackRock have recently entered the crypto asset management space.

Market Expansion and Future Outlook

Crypto asset management firms have continued to grow during the bull market. In April 2024, Pantera Capital announced plans to raise $1 billion for a new crypto fund. Meanwhile, Grayscale’s portfolio saw 85% monthly growth in November 2024.

Market research suggests that the crypto asset management industry is expected to expand at a compound annual growth rate (CAGR) of 22%-25% between 2023 and 2030. Asia-Pacific is the fastest-growing market, while North America remains the largest.

Factors driving this growth include regulatory clarity, the rise of DeFi, and increased institutional interest in digital assets.

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