(Bloomberg) -- A leveraged ETF seeking to offer two-times the daily performance of Ether clocked its biggest-ever plunge as the token sold off amid President Donald Trump’s latest trade-war salvo.
The 2x Ether ETF (ticker ETHU) was down 46% at one point on Monday, the most since its June inception as the underlying digital asset shed as much as 35% over the weekend. The nearly $1 billion fund had seen inflows every month since its launch last year, hauling in $185 million in January alone, data compiled by Bloomberg show.
The ETF did not track Ether’s fall exactly because ETHU does not invest directly in Ether but uses futures contracts to seek to provide its intended 2x goal. Another 2x Ether fund, the T-Rex 2X Long Ether Daily Target ETF (ETU) also declined, losing 47% at one point.
The episode is the latest hit to leveraged-ETF traders after their Nvidia Corp. bets got pummeled last week during an AI-induced selloff.
“Leveraged ETFs are meant to capture volatility, so large swings in these products shouldn’t be unexpected,” said Roxanna Islam, head of sector and industry research at TMX VettaFi. The “2x Ether ETF, ETHU, faces a similar fate to 2x Nvidia ETFs last week after growing tariff concerns contributed to liquidations in the space, which further demonstrates that crypto isn’t immune to traditional market shocks.”
Ether, the second-largest cryptocurrency by market value, fell as much as 35% on Sunday in New York in what was its biggest intraday drop in roughly four years. The plunge caught many off guard and triggered a wave of liquidations.
Though Ether pared some of its losses, it was down roughly 20% since Friday as of 9:45 a.m. in New York, leaving ETHU 38% lower. The selloff came after Trump announced a slew of tariffs on Canada, Mexico and China and threatened further levies on the European Union, sparking a selloff in global stocks as well.
Crypto-centric ETFs of all stripes, including those based on Bitcoin, have seen tremendous investor interest in the wake of Trump’s presidential victory given his administration’s embrace of the digital-assets industry.
Bitcoin ETFs took in billions of dollars last year as traders bet that cryptocurrencies would benefit from the new president. Investors added nearly $1 billion to ETHU in 2024 even as the fund dropped 50% after its June inception. Its smaller competitor, ETU, had just $12 million in assets, data compiled by Bloomberg show.
ETHU “has quietly become a dominant force in CME’s Ether futures market,” said K33 Research Head of Research Vetle Lunde, citing the derivatives marketplace. Lunde estimates that as of Friday, the fund accounted for “a staggering” 55% of all open interest in CME’s Ether futures.
Bitcoin was down a more muted 1% as of 9:45 a.m. in New York, though it had lost as much as 10% over the weekend.
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