On October 2nd, the U.S. Securities and Exchange Commission sanctioned Cboe BZX’s proposal for a new Volatility Shares 3x Ether ETF, in conjunction with five other comparable offerings. The SEC has granted approval for the proposed rule changes that permit these funds to be listed on Cboe BZX; however, it did not sanction their initial trade. Volatility Shares’ 3x Ether ETF is designed to magnify both upward and downward price fluctuations in Ether futures by a factor of three. Given that this is an unleveraged daily reset product, significant fluctuations can lead to returns that diverge markedly from three times ETH’s longer-term performance. Furthermore, futures-based leveraged products incur rollover costs due to the continuous buying and selling of the underlying contracts at elevated prices. They may also encounter tracking errors in relation to Spot ETH.
It is conceivable that a product with high demand could stimulate heightened short-term trading activity, alongside rebalancing efforts following its launch. However, trading still necessitates the effectiveness of the S-1 registration. However, until the product has completed its S-1 registration process, trading cannot occur. However, despite the announcement, the ETF flows appeared unresponsive. Instead, the data recorded a greater volume of outflows on the product. Negative flows persisted for four consecutive days, intensifying from $59.58 million on September 30 to $55.37 million on October 1, before declining to $37.36 million on October 2. The four-day reversal resulted in a reduction of $155 million following the inflow streak observed in September. This simply implies that investors have not shifted toward ETH exposure despite the leveraged route.
Conversely, ETF assets experienced a decline, decreasing from $17.92 billion on September 22 to $17.46 billion, resulting in a substantial loss of $460 million. This was the same range recorded on the 18th of September, when the outflows hit $407 million. That divergence is significant because high turnover is not resulting in increased demand. Consequently, the 3x approval has not yet enhanced institutional flows, resulting in ETH being more reliant on spot and derivatives demand, which may heighten its sensitivity to redemptions. Despite the significant outflows, the structure of ETH remains resilient above $2,700, as buyers are effectively absorbing the selling pressure near the midpoint of a wider range.
After approaching $2,777 on October 2nd, the price retraced toward the $2,625 support zone before experiencing a recovery. That reaction indicates that demand was sufficiently robust to uphold the $2,625-$2,650 range. However, buyers have encountered difficulties in transforming that defence into a lasting breakout. Each attempt to reach $2,750 has encountered fresh selling pressure, which has consequently maintained the altcoin beneath the $2,800-$2,825 resistance level. Meanwhile, the RSI approaching 52 indicates that momentum has moderated without tipping into bearish territory. Consequently, the range persists, yet the tension is escalating on both fronts. A break above 2,800 could restore momentum toward 3,000, while losing 2,625 would weaken the recovery and expose lower support.
