The Securities and Exchange Commission (SEC) has approved the first leveraged exchange-traded fund (ETF) tied to the SUI token, issued by 21Shares, a leading issuer of crypto exchange-traded products. This decision comes as the crypto market grapples with the persistent risks associated with high leverage. The 2x Long SUI ETF, which will trade on Nasdaq under the ticker TXXS, aims to provide investors with a magnified exposure to the Layer 1 network.
The approval arrives shortly after a significant downturn in the cryptocurrency market, where nearly $1 billion in leveraged positions were liquidated. This "leverage wipeout" occurred during a sharp price decline that impacted Bitcoin, Ether, and smaller altcoins. Bitcoin, for instance, slid as much as 8% to $83,824, marking a nearly 30% decline since early October. Ether also experienced a substantial drop, falling 10% to $2,719. These events have amplified concerns about the fragility of the market and the potential for excessive leverage to exacerbate price swings.
The 2x Long SUI ETF utilizes derivatives to amplify returns, offering a way for investors to gain leveraged exposure without directly holding the cryptocurrency. If SUI rises 10% in a day, the ETF aims to increase by approximately 20%, with losses similarly magnified. The ETF has a management fee of 1.89%. The fund will not seek to achieve its stated investment objective over a period longer than a single day.
Evan Cheng, Co-Founder and CEO of Mysten Labs, welcomed the SEC's decision, viewing it as a sign of growing regulatory support for new crypto market structures. He stated that listing TXXS on Nasdaq reflects confidence in SUI's long-term role in capital markets and demonstrates how enhanced regulatory clarity can facilitate new structured investment products. The SEC had previously paused evaluations of other leveraged ETF proposals, seeking clarity on the risks involved, making this approval noteworthy in the current regulatory environment.
The launch of the "SUI-on-steroids" ETF has sparked debate about the role of leverage in the crypto space. While it offers the potential for amplified gains, it also carries significant risks, particularly in a market known for its volatility. The recent liquidations serve as a stark reminder of the dangers of excessive leverage, where even small market triggers can lead to substantial losses. Some industry observers believe that the leverage wipeout was a necessary cleansing of excessive speculation, potentially laying the foundation for a more sustainable recovery.
Sui is a Layer-1 blockchain designed for scalability and high-speed transactions. News of the ETF approval has already impacted SUI's price, with analysts predicting a potential climb to $2 and beyond. The 21Shares 2x Long Sui ETF becomes the first Sui ETF to get approval for listing and trading, offering twice the daily total return of SUI. Sui Network reacted to the approval, saying "New chapter for Sui investing begins".
