(Bloomberg) -- An exchange-traded funds issuer is trying its hand at a levered Bitcoin futures product as digital assets attempt to stage a recovery following last year’s brutal flops.  

The 2x Bitcoin Strategy ETF by Volatility Shares would seek to double the performance of the S&P CME Bitcoin Futures Daily Roll Index each day, according to a filing. The fund would carry an overall expense ratio of 1.89% and would trade under the ticker BITX.

The application lands at a time when cryptocurrencies are rebounding from a string of devastating failures last year. Bitcoin has rallied roughly 70% so far in 2023, though at $28,500, it’s still trading well below its 2021 high of nearly $69,000. Plus, market-watchers say, past precedents don’t bode well for approvals of levered crypto funds. 

“This should get approved, but I don’t think it’s going to,” said Athanasios Psarofagis at Bloomberg Intelligence, pointing to the Securities and Exchange Commission rejecting similar offerings previously. The agency declined to comment on Volatility Shares’ filing.

A Bitcoin futures ETF has existed since 2021, though the SEC has been hesitant about approving a physically backed fund. More complex derivatives ETFs have also been taboo in the past. Direxion, a financial products provider known for its leveraged ETFs, pulled an application for a bearish Bitcoin fund that same year and issuer Valkyrie also dropped plans for a levered product based on the coin. 

The industry is hyper-focused on Grayscale Investments’s campaign to convert its Bitcoin Trust (ticker GBTC) into an ETF, which some market-watchers say stands a good chance of happening. But the SEC may not want to green-light many Bitcoin-derivatives products until the outcome of that case is known, according to Psarofagis.

“I don’t see them doing anything until that’s over,” he said. 

In 2018, the SEC also quashed a slew of proposals by Direxion for levered Bitcoin products — including for 2x bear and bull funds — though the crypto sector has changed drastically since then. 

Regulators are in the midst of a crackdown on the crypto space, where they’ve have been doling out enforcement actions and lawsuit after lawsuit as they look to stamp out what they see as impropriety within the industry. The actions follow a crash in prices last year that saw Bitcoin lose 64% and Ether, the second-largest crypto, drop more than 67%, on the heels of the implosions of a number of once-vaunted projects, including the collapse of the FTX exchange. 

“The rejection of prior leveraged funds — and smaller than 2x — isn’t a great harbinger,” said Todd Sohn, ETF strategist at Strategas Securities. On the other hand he noted, at least the fund is using an index from a well-known provider, the S&P.

And with past denials happening a year and a half ago, Sohn said it’s possible “the pure passage of time has made SEC more comfortable — despite all the noted figures falling on swords recently.”

--With assistance from Katie Greifeld.

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