Leveraged ETFs are very risky investments and they are mostly marketed to retail traders. Large investment groups can get their own leverage and don't need to use these products. This post is highlighting one of the dark sides of investing in the traditional stock market. There are lots of things to watch out for when investing in the stock market. This is one of those things! ![image.png](https://files.peakd.com/file/peakd-hive/hurtlocker/AKqcSf2nSkLb13MBeiEEfMgrkzeBq5Pn7kjwcBu6BHYmpG4HzyrzEEWahkfDxTf.png) To start off, what is an ETF? (Let's exclude the leveraged piece for a second). ETF is an acronym that stands for Exchange Traded Fund. This is aptly named because it is an investment fund that trades on a stock exchange. So an ETF is a pool of investments you can invest in without needing to work directly with an investment group because you can just buy shares in the fund off the stock market. An ETF does have fees just like any other investment fund. Some ETFs are pretty simple and some are pretty complicated. For instance, IBIT is Blackrock's Spot Bitcoin ETF which is pretty simple. Here is the holdings for IBIT as of 3/16/2026 ![image.png](https://files.peakd.com/file/peakd-hive/hurtlocker/Eo4Jo4pzexqsBprMagoei866uFQNJMmKbnwHxRhwUfWrb7GH8Te81AXusZ17Zc1X8Co.png) https://www.ishares.com/us/products/333011/ishares-bitcoin-trust-etf When people buy shares in IBIT they are buying shares in a fund that is invested in Bitcoin. Some people may wonder, "why not just buy actual Bitcoin?" There are quite a few reasons to but a Spot Bitcoin ETF over just Bitcoin. If you want us to dig deeper into why the spot Bitcoin ETFs are so popular to traditional investors, please let me know in the comments and we can debate the pros and cons there. Moving on, so what is a leveraged ETF? A "leveraged ETF" is also aptly named because it is just an ETF that is leveraged. So it is an investment fund that is leveraged meaning they mostly use debt to create a leveraged position. BTCL is an example of a leveraged Bitcoin ETF. It basically uses debt to amplify returns or losses. Here is the holdings for BTCL as of 3/16/2026 ![image.png](https://files.peakd.com/file/peakd-hive/hurtlocker/23t88HKVMHbVJunB2jVZRfKnLbA98LWAoX3QEEkobMnohwt1VuBceVk1fW78WiLxMUvbe.png) https://www.rexshares.com/btcl/ So many times people look at these leveraged funds and think something link, "O wow! I can make 2x Bitcoin that's awesome!" My short answer to that statement is, "Nope!" So why do I say nope? It says the fund is 2x after all! But you actually need to read what these leveraged funds are doing. And most of these funds rebalance each day. Let's look at the fund objective for $BTCL. Screenshot below. ![image.png](https://files.peakd.com/file/peakd-hive/hurtlocker/EoH4i29QzoyfciQyNJczzgTTcz92BFUBsrD33YGNLpETaZmXvwo79yCUroQdAKzEk5i.png) https://www.rexshares.com/btcl/ This fund rebalances everyday. So this creates something called Volatility Decay. Also aptly named! 😅 What is Volatility Decay? Basically, the daily reset component creates a situation where the leveraged ETF does not typically trade at 2x the asset it is trying to track, over long periods. Many times it will even underperform the asset in question. **I can give you a quick example with just made up numbers:** So assume you put 100 USD into IBIT. Then assume Bitcoin goes up 25% in day one, down 20% in day 2, and up 5% in day 3. **IBIT Example (no leverage):** (Day 1) 100 * 1.25 = 125 (Day 2) 125 * 0.80 = 100 (Day 3) 100 * 1.05 = 105 Cool! So it was a crazy ride but you are up 5%! Now assume you put 100 USD in BTCL instead. So Bitcoin goes up 25% in day one, down 20% in day 2, and up 5% in day 3. (So BTCL goes up 50% in day one, down 40% in day 2, and up 10% in day 3). **BTCL Example (2x leverage):** (Day 1) 100 * 1.50 = 150 (Day 2) 150 * 0.60 = 90 (Day 3) 90 * 1.10 = 99 Wow! That was a really crazy ride but you are down 1%! So with something like Bitcoin these products are incredibly risky! And most these funds are geared towards volatile assets. What makes these leverage ETFs even worse is their fees are usual pretty high. We can compare IBIT fees to BTCL fees as an example: **IBIT Fees:** ![image.png](https://files.peakd.com/file/peakd-hive/hurtlocker/Eo8ZYbEvgKsQMV8SQQCVZUUG8g1u367fcJzanJ7GV9kQSrb5Jz6TCsg8yroexxyBAYy.png) https://www.ishares.com/us/products/333011/ishares-bitcoin-trust-etf **BTCL Fees:** ![image.png](https://files.peakd.com/file/peakd-hive/hurtlocker/23t8CoYsD4gZzSJdck7hneL7eurnf8ziKBqhbHEMMScFCNQStZp6T1gfhTTRTa3Ehhrwu.png) https://www.rexshares.com/btcl/ under their prospectus. This concept is somewhat complicated but I did try to make it as simple as I can. If there is anything I can provide clarity on please let me know in the comments! As always, this post is not financial advice and meant for educational purposes only. Cheers, Hurt

ETFs 101