The US Securities and Exchange Commission (SEC) has implemented a significant rule change, limiting leverage in exchange-traded funds (ETFs) for cryptocurrencies. This move comes as the SEC targets providers offering extreme leverage, capped at 200% or 2X the investment value. The reasoning behind this regulation is to combat market volatility and prevent potential manipulation. 2023 saw a surge in demand for leverage-enabled ETFs as investors sought higher returns, resulting in unprecedented levels of open interest and significant price fluctuations. The SEC’s crackdown could potentially curb these trends by limiting the use of leverage within crypto ETFs. This measure aims to reduce potential losses for retail investors while mitigating market volatility. Experts are now debating whether this move will promote more trading activity on spot markets or further increase investor demand for derivatives-based investments.