Popular crypto analyst Scott Melker has criticized Volatility Shares’ latest proposal to launch 3x and 5x leveraged XRP ETFs
For context, Volatility Shares applied to the SEC yesterday to launch 27 new leveraged single-asset exchange-traded funds (ETFs).
Volatility New ETF Filing
The proposed products span both major U.S. stocks and crypto assets, featuring 3x and 5x leverage exposure to names like XRP, Ethereum, Bitcoin, and Solana alongside popular equities such as Tesla, Amazon, MicroStrategy, and Circle.
His frustration stems from the high-risk nature of leveraged products combined with the volatility associated with altcoins. Leverage products are known to amplify gains and losses, mainly for sophisticated investors capable of managing risk.
In Melker’s view, applying such leveraged trading to altcoins—assets already known for extreme volatility and traded mainly by retail investors—could expose individual traders to substantial losses.
Based on Volatility Shares’ proposal, a 10% drop in XRP price could mean a 30-50% loss for the 3x or 5x leveraged XRP ETF. If prices continue to fall, investors’ positions could be wiped out completely.
The dangers of leverage were on display recently when $19.31 billion worth of leveraged positions were liquidated over the weekend—the largest liquidation event in history. Notably, XRP positions accounted for around $707 million of that total.
Bloomberg ETF Analyst React
Besides Melker, other financial experts also reacted to Volatility Shares’ recent ETF filings. Eric Balchunas of Bloomberg noted that while the SEC has yet to approve a 3x leverage ETF, Volatility is pushing for 5x versions, which many consider to be even riskier.
Despite the risky nature of the proposed ETFs, Balchunas emphasized that the products will launch 75 days after the filing if the ongoing government shutdown continues and the SEC does not disapprove the application.
Meanwhile, Volatility Shares already has an existing XRP ETF. Launched in May, the product gives investors 1:1 exposure to the price movements of XRP. The fund currently boasts an AUM of $189.1 million, with a daily volume of $9.7 million.
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