SEC Scrutinizes Filings for Volatile 5x Crypto ETFs That Could 'Destroy Portfolios'

On October 14, 2025, the U.S. Securities and Exchange Commission (SEC) received a set of filings for a suite of 5x leveraged crypto exchange-traded funds (ETFs) from Volatility Shares. The proposed funds, including 5x BTC, 5x ETH, 5x SOL, and 5x XRP, aim to magnify the daily returns of their underlying assets by a factor of five.

These ETFs would not hold the actual cryptocurrencies but instead track futures contracts, rebalancing their exposure daily. This daily reset mechanism means the funds can quickly compound gains and losses, potentially "destroying portfolios overnight" during periods of high volatility.

Experts warn that these products are essentially "one-day bets" unsuitable for long-term investors. The compounding effect of the daily resets can lead to significant underperformance compared to the underlying assets, especially in choppy markets. For instance, a 5x Bitcoin ETF could swing more than 50% in a single week during volatile periods.

The SEC is now carefully scrutinizing these filings, as the leveraged structure introduces liquidity and funding risks. The regulator will likely weigh the potential benefits of amplified crypto exposure against the dangers of accelerated volatility and the risk of outsized losses for retail traders.

Volatility Shares' earlier launch of a 2x Bitcoin ETF has already proven the demand for leveraged crypto products. However, industry analysts caution that these 5x funds are the "logical, if reckless, next step" that could create a feedback loop of volatility and liquidations in the crypto markets.