The SEC has approved a leveraged exchange-traded fund (ETF) launched by 21Shares, which is linked to the Sui token, allowing investors to gain amplified exposure to the Sui ecosystem amid ongoing concerns about leverage risks in the cryptocurrency market.
On Thursday, the Sui Foundation announced that 21Shares has launched its 2x leveraged Sui ETF, which is listed on Nasdaq under the ticker symbol TXXS. The fund aims to achieve twice the daily return of Sui, providing investors with a way to gain leveraged exposure without directly holding the cryptocurrency.
In practical terms, if Sui rises by 10% in a single day, the ETF's target increase would be approximately 20%. Losses are similarly amplified when the price declines.
The fund does not hold Sui tokens but instead uses derivatives, including swaps and other financial contracts, to track the price movements of the token.
So far, the U.S. Securities and Exchange Commission has been reluctant to approve higher-leverage cryptocurrency investment products. The regulator stated in October that it remains "unclear" whether the proposed 3x and 5x leveraged ETFs meet regulatory standards.
Earlier this week, the agency also issued a series of warning letters to fund issuers, reminding them not to offer products with such high leverage levels on stocks, commodities, or digital assets.
The debate surrounding the curtailment of excessive leverage is particularly relevant in the cryptocurrency market, as the extensive use of borrowed funds continues to amplify price volatility, sometimes leading to severe losses for traders.
On October 10, the crypto market experienced the largest recorded leveraged-driven sell-off, with approximately $19 billion in positions being forcibly liquidated as prices rapidly declined, forcing high-leverage traders to exit.
This aftermath also affected spot investors, who witnessed the value of their holdings decline in the following weeks. For example, after Bitcoin reached a historic high of nearly $126,000 in October, it fell below $80,000 in November.
Compared to traditional markets, leverage plays a more significant role in the cryptocurrency market, primarily due to the widespread use of derivatives exchanges and perpetual contracts.
Platforms like Binance and Bybit allow traders to establish high-leverage positions on so-called perpetual contracts—often 10x, 50x, or even higher—where perpetual contracts are agreements with no expiration date that track the price of the underlying asset.
Related: The SEC warns ETF issuers about excessive leverage
Original article: “After Cryptocurrency Leverage Liquidation, the SEC Approves ‘Steroid Version of SUI’ ETF”
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