Tuttle Capital management has submitted filings for at least 10 leveraged ETFs, including the recently launched $Trump and $Melania meme coins. Analysts project that these coins will test the limits of the Trump administration’s crypto-friendly regulators.
According to the filing document, the firm included leveraged exchange-traded fund products for assets like XRP (XRP), Bonk (BONK), BNP, Solana (SOL), Litecoin (LTC), and the meme coin tied to U.S. President Donald Trump (TRUMP). This also marks the ETF to include assets tracking Chainlink (LINK), Cardano (ADA), Polkadot (DOT), BenePit Protocol (BNP), and Melania Meme (MELANIA).
A Case of Issuers Testing the Limits
Leveraged ETFs are investment funds designed to offer amplified returns based on the underlying asset’s daily performance or digital assets’ basked performance. The product uses debt and financial derivatives to deliver twice, thrice, or even higher multiples of the daily returns of the article it is designed to track.
The latest filings have come hot on the heels of changes within the crypto regulatory framework. The ascension of Donald Trump to his second term in office and the departure of crypto-critic Gary Gensler as SEC Chair have brought a lot of enthusiasm within the crypto industry and a notable increase in the number of ETF filings. Commenting on the latest development, crypto analyst Seyffart stated:
“To be very clear here. This is a case of issuers testing the limits of what this SEC will allow. I’m expecting the new crypto task force (led by @HesterPeirce) to likely be the lynchpin in determining what’s gonna be allowed vs. what isn’t.”
Introduction of 2x $Trump and $Melania ETFs Unprecedented
On the other hand, Bloomberg senior ETF analyst Eric Balchunas also observed that the latest filing by Tuttle Capital was made under the 40 Act, meaning the leveraged ETFs could potentially be allowed to start trading as early as April 2025 unless the SEC disapproves their application. Balchunas observed the unusual trend associated with this filing, especially the proposal for a 2x $Melania ETF before a regular 1x $Melania ETF. According to the analyst, while similar products already exist in Europe, introducing the 2x $Trump and $Melania ETFs was unprecedented. He added:
“It will be interesting to see where the SEC draws the line (if at all) and why […] I will say it’s been a week since the Doge/Trump filing, and it hasn’t been withdrawn. That’s something.”
Approval or Rejection Will Set a Precedent for ETFs
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The Tuttle Capital leveraged ETFs filing has come a few days following a recent application by REX shares that included several meme coin ETFs. The filings by REX also included products that would track digital assets like TRUMP, BONK, DOGE, Bitcoin, and Ethereum. While the increased numbers of filings show increasing optimism from institutional investors in crypto, it is in their approval that the rubber meets the road. Whatever the SEC will do with the latest applications, whether in approving or rejecting, will set a precedent for the future of ETFs, Balchunas observed:
“I will say it’s been a week since Doge/Trump filed, and it hasn’t been withdrawn. That’s something.”
Conclusion
During the presidential campaigns, the Trump administration made many promises to end what looked like regulatory hostility against the crypto industry. The SEC has already created a crypto task force dedicated to creating a framework for cryptocurrency headed by Commissioner Hester Peirce. The decision on the application by Tuttle Capital for 10 leveraged ETFs and several others will set the tone for the trajectory that the sector will follow, with market watchers suggesting additional ETFs could soon follow and further expand the field.
Frequently Asked Questions (FAQs)
What is a leveraged ETF?
A Leveraged ETF is a financial instrument that aims to enhance the returns of a specific asset class. Unlike traditional ETFs, it mirrors an index’s performance and utilizes financial derivatives and borrowing to increase their exposure to underlying assets.
How does it work?
The leveraged ETF cleverly mixes leverage and financial derivatives to boost the returns of an underlying asset class or index. It uses tools like swaps, options, and futures contracts to reach the required degree of leverage.
How do leveraged ETFs compare to regular ETFs?
Since leveraged ETFs give more exposure to underlying assets, they also increase the reward and risk potential.
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