Leveraged ETF rebalancing funds have become amplifiers of US stock volatility The daily rebalancing funds of leveraged ETFs in the United States have once approached $50 billion. This data mainly looks at the mechanical trading generated by leveraged ETFs passively adjusting their underlying exposure before and after the daily closing in order to maintain 2x, 3x, long short leverage. Coincidentally, today I saw Brother Link @ CryptoSociety42 discussing the issue of TQQQ. Let's give an example together. The core of leveraged ETFs is daily resetting. This is the key! For example, a 3x long QQ ETF aims to maintain approximately 3x exposure per day. After the market rises, the net asset value of the fund increases. If you want to maintain triple leverage the next day, you need to continue buying underlying assets or futures. After the market falls, the net asset value of the fund decreases, and it is necessary to sell the exposure and adjust the leverage back to the target level. For example, a 3x long ETF managing $1 million has an initial market exposure of approximately $3 million. If the index rises by 2% on that day, the net asset value of the fund will increase to approximately 1.06 million US dollars. The next day, to maintain triple leverage, the target exposure becomes 3.18 million US dollars. After the original exposure of 3 million US dollars increased, it became 3.06 million US dollars, with a difference of 120000 US dollars in the middle. This 120000 US dollars needs to be further bought. If the index drops by 2%, the net asset value of the fund will decrease to approximately $940000, and the target exposure will become $2.82 million. After the original $3 million exposure fell, there was still $2.94 million left, with an additional $120000 in the middle, which needs to be sold. So the rebalancing mechanism of leveraged ETFs is very simple, adding positions after a rise and reducing positions after a fall. There is no direction judgment, only adjusting positions according to rules, but this rule itself will amplify short-term fluctuations. The scale of adjusting positions for a single product is already considerable. If leveraged products such as 2x, 3x, long, short, Nasdaq, S&P, and semiconductor are added together, extreme market conditions can result in mechanical buying and selling worth billions or even tens of billions of dollars. In 2026, the daily rebalancing funds of leveraged ETFs in the United States have approached the level of $50 billion, indicating that it has become an important variable in short-term market volatility. In fact, South Korean leveraged ETFs also have the same mechanism. Korean retail investors heavily use leveraged ETFs to chase after Samsung Electronics, SK Hynix, semiconductor, and AI assets. After the market rises, leveraged ETFs continue to increase their holdings, which will push the market even hotter. After the market falls, leveraged ETFs passively reduce their holdings, and the pullback will also be more urgent. The difference between the United States and South Korea lies in their market resilience. The depth of the US market is even greater, with the Nasdaq, S&P, futures, options, and market making systems all being very large. The $50 billion is mainly used to amplify closing and short-term fluctuations. The South Korean market is much smaller in size and its weight is concentrated in a few semiconductor companies. The same leverage rebalancing mechanism will have a more direct impact on the index and heavyweight stocks. So looking at the current stock markets in the United States and South Korea, in addition to fundamentals, capital flows, and financial reports, we also need to consider the mechanical adjustment of leveraged products. When it rises, it makes the market look stronger, but when it falls, it also makes selling pressure come faster. The series of data we have seen recently refers to the withdrawal of professional funds and the impact of retail investors. Whether in the United States or South Korea, leveraged ETFs are increasing significantly. These are all reasons that cause significant market volatility.