Why did the SEC approve the leveraged Bitcoin ETF?

The SEC has recently approved the Volatility Shares 2x Bitcoin Strategy (BITX), the first leveraged bitcoin ETF in the US. This ETF allows investors to obtain exposure to the cryptocurrency market for half the Bitcoin price and amplify their returns by two times. The ETF is correlated to the CME Bitcoin Futures Daily Roll Index and is set to debut on June 27, 2022.

One possible reason why the SEC accepted this leverage Bitcoin ETF is that they want to allow for shorts to occur. Shorting is a strategy that involves betting against an asset’s price, hoping it will fall. By allowing investors to short bitcoin through a leveraged ETF, the SEC may be trying to introduce more liquidity and stability to the crypto market and protect investors from excessive volatility and risk. Shorting can also help balance the supply and demand of Bitcoin and prevent price bubbles or crashes.

Another reason why the SEC may have approved this leverage bitcoin ETF because they are not very fond of Bitcoin and its disruptive potential. By allowing investors to short Bitcoin through a leveraged ETF, the SEC may be hoping to drive down the price of Bitcoin and discourage its adoption and innovation. Shorting can also create more selling pressure and negative sentiment in the crypto market, leading to price crashes or corrections. However, shorting is not a risk-free strategy, especially for a resilient asset like Bitcoin. Therefore, investors should be careful of the possible rebounds and rallies that can wipe out their profits and capital.