Futures-based exchange-traded funds tied to Solana and XRP have accumulated almost $3 billion in assets under management amid market anticipation for potential spot ETF approvals.

The momentum has been fueled by new leveraged products, a surge in derivatives positioning, and demand for yield-oriented structures.

In early 2025, a leak indicating the CME Group was preparing to list futures contracts for Solana and XRP prompted immediate price gains of about 3%. That development set the stage for institutional product launches built on regulated derivatives markets.

By mid-May, open interest in XRP futures jumped by roughly $1 billion in a week, moving from $2.4 billion to $3.4 billion, and a price move from around $2.10 to $2.45. This surge came as market participants positioned ahead of speculation that the U.S. Securities and Exchange Commission could consider a spot XRP ETF by midyear.

In July, ProShares launched leveraged futures ETFs for both assets after receiving NYSE Arca approval. The Ultra Solana ETF (SLON) and Ultra XRP ETF (UXRP) each target twice the daily performance of their respective CME-regulated futures, without holding the underlying tokens. These launches added to an expanding lineup of altcoin-linked ETFs that have attracted capital in a market still dominated by Bitcoin and Ethereum funds.

A parallel development came with the debut of the REX-Osprey Solana Staking ETF (SSK) in early July. The product recorded $33 million in first-day trading volume and $12 million in inflows, far exceeding the initial volumes of several futures-based products. Structured as a spot-based vehicle that integrates staking rewards, the ETF offers yield-bearing exposure, drawing interest from investors seeking income-generating strategies in the digital asset space.

ETF data shows that in the first week of July, Solana-linked ETFs saw $20 million in inflows and XRP ETFs added $10 million, contributing to a record $189 billion in total crypto ETF assets under management. XRP futures-based funds have grown rapidly in this environment.

While futures-based ETFs differ from spot products in structure and exposure, their asset growth and trading activity demonstrate market depth and liquidity in these altcoins.

Historically, the establishment of a liquid futures market has been viewed as a step that can precede spot ETF approval, offering regulators a track record of pricing transparency and risk management. At the same time, leveraged and futures strategies carry risks such as daily compounding effects and contract roll costs, which can amplify volatility and diverge from spot market performance.

The convergence of heightened futures activity, substantial ETF inflows, and innovative yield-focused structures has put Solana and XRP into a more prominent position in regulated investment markets.

For now, the $3 billion threshold in futures-based ETF assets reflects the scale of capital allocation underway in anticipation of potential changes in the regulatory landscape.

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ProShares launched two exchange-traded funds (ETFs) that seek to deliver 2x returns on the daily price movement of Solana (SOL) and XRP, adding leveraged exposure to the firm’s expanding roster of crypto-linked products, according to a July 15 announcement.

The ProShares Ultra Solana ETF (SLON) targets 200% of Solana’s daily performance, while the ProShares Ultra XRP ETF (UXRP) aims for the same leverage on XRP. 

Both funds track futures contracts rather than holding the underlying tokens, mirroring the structure ProShares uses for its Bitcoin and Ethereum offerings. 

CEO Michael Sapir said the new ETFs provide traders with a way to “overcome the challenges of acquiring leveraged exposure” to two blockchains that investors frequently cite for high-throughput payments and decentralized applications. 

He added that the broader adoption of Solana and XRP encouraged ProShares to extend its suite beyond Bitcoin (BTC) and Ethereum (ETH).

Broader leveraged crypto ETF line

Leveraged crypto ETFs require investors to manage their positions actively because the products reset exposure daily. Gains compound during strong single‑direction moves, but losses magnify just as quickly when prices reverse. 

ProShares warned in the prospectus that SLON and UXRP are suitable for experienced market participants who understand the mechanics of daily leverage and the potential for erosion in volatile markets. The funds charge management fees in line with the firm’s previous 2x funds.

ProShares broke ground in October 2021 with BITO, the first US Bitcoin futures‑linked ETF, and followed with BITI, the first inverse Bitcoin ETF. Last year, the firm listed EETH, the first ETF tied to Ethereum futures, and SETH, an inverse Ethereum fund. 

Including SLON and UXRP, ProShares now offers 12 crypto-linked ETFs and three crypto-linked mutual funds, with over $1.5 billion spread across its leveraged lineup. 

The company reiterated that none of its funds invest directly in digital assets. Instead, they hold cash‑settled futures traded on regulated exchanges.

Competitors have filed for products that track other digital asset pairs. However, regulatory clearance remains limited to futures-based structures that avoid direct custody issues.

ProShares said it will continue to evaluate demand for additional leveraged or inverse exposure as market infrastructure matures and regulatory guidance evolves.

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Simplified access to leverage on your favorite markets is getting an upgrade. Our Base V3 deployment of Synthetix Leveraged Tokens is set to go live next week on January 21st. To celebrate this milestone, we’re running a five-week rewards campaign with 150,000 USDC and 75,000 OP for traders who mint Leveraged Tokens starting January 21st. For those who can’t wait, you can mint Leveraged Tokens on our V2 Optimism deployment today. 

Over five weeks, traders can get their share of OP and USDC tokens by minting Synthetix Leveraged Tokens on either OP or Base deployments. Those using the OP deployment will receive a share of 15,000 OP per week, and those using the Base V3 deployment will receive a share of 30,000 USDC per week. The rewards received by each trader will be determined pro-rata according to their fees paid to the Synthetix Leverage protocol during each weekly period.*

*Update: As of Week 2, beginning 01/28/25 00:00 UTC, rewards will be earned according to volume, instead of fees. All other program details remain the same. 

Mint Synthetix Leveraged Tokens of any size during the promotional period starting January 21st at 00:00 UTC through February 25th to be eligible for OP and USDC rewards. 

You can view your progress on the Leaderboard, and rewards earned each week will be claimable via the Rewards tab. Traders will have 28 days following the end of the program to claim their rewards.

The Leveraged Token Rally begins Tuesday, January 21st, so set your reminders and stay tuned to our announcement channels for full details and to earn your share of OP and USDC. Meanwhile, you can learn more about Synthetix Leveraged Tokens and try them for yourself at leverage.synthetix.io. 

An exciting first step in a broader tokenized vaults offerings

Like people of good taste everywhere, you have probably already heard about Synthetix’ refreshed strategic vision, and about one of its key pillars: graduating from being a B2B financial infrastructure protocol to also designing and curating a set of vaults and tokenized strategies. These strategies will provide a user-friendly, composable, highly-abstracted way for new users to interact with Synthetix.

Following the acquisition of TLX, Synthetix is working on launching a suite of Leveraged Tokens on both Optimism and Base networks. So, what are leveraged tokens?

What are leveraged tokens?

Simply put, leveraged tokens are the tokenized representation of an ownership position in a levered strategy: aiming to earn multiple times the price movement of an underlying asset, like ETH or BTC. So, an ‘ETH3x’ long token aims to go up and down three times as fast as ETH. 

Their main value proposition is short-term convenience: compared to managing a levered position yourself using derivatives or money-market looping, a leveraged token offers transferability, fungibility, composability, and automatic protection from liquidation. Wouldn’t it be nice to just see your levered position in your wallet next to your ETH and your memecoins?

Structured products that give levered exposure to a base asset have been around forever and are a thing in Tradfi. A notable example is a $25bn 3x Nasdaq ETF, which ‘seeks daily investment results, before fees and expenses, that correspond to three times (3x) the daily performance of the Nasdaq-100 Index’. 

In centralized crypto, FTX and Binance both used to offer them, and other DeFi actors currently offer them. So they are a thing, and we hope to make them a bigger and better thing. 

A taxonomy of leveraged tokens

Despite being such a simple financial instrument, the design space for leveraged tokens is practically infinite. Principle characteristics to look out for include:

• Underlying asset and leverage level: What return are we trying to emulate? BTC3X? DOGE5X?
• Source of leverage: How is the underlying levered position achieved? Using a derivative position on a Perp DEX like Synthetix? Buying spot tokens on margin using a spot DEX like Uniswap and a lending market like Aave?
• Rebalancing mechanics: As the price of the underlying moves around and leverage strays from its 3x target, how does the strategy do its incremental trading (‘rebalancing’) to get back to target? Is it programmatic or discretionary? Performed at fixed time intervals or when a leverage limit is reached? Is it trust-minimized and encoded in the contract logic, or performed by a trusted off-chain actor? 
• Mint/redeem experience: Upon buying a fresh token and selling it back to the pool, are any timelocks or size limitations enforced? What fees are charged? Are the trading costs that a new or departing investor might cause because he will trigger a rebalance incurred by the investor or the collective token holders?

Financial Performance

There is an unavoidable tracking error between the returns of the underlying instrument, multiplied by the leverage factor, and the returns of the strategy underpinning the leveraged token. This error stems from four places:

• Fees: Management fees, mint, and redemption fees charged by the vault.
• The cost of carry: Where there is leverage, there is a loan. Someone is lending us capital so we can have more exposure to the underlying asset than just buying it outright. In practice, the cost that will be borne is either the stablecoin borrow rate if the leverage is achieved by borrowing (e.g., USDC on Aave) or the perpetual contract funding rate if it is achieved by opening a long position on a derivatives DEX like Synthetix.
• Trading costs: The underlying vault needs to trade constantly. Mints, redemptions, and movements in the price of the underlying asset all cause the effective leverage to deviate from the target. When the vault trades, it will incur:
  • Trading fees: like the swap fee on Uniswap or the maker/taker and keeper fees on Synthetix.
  • Slippage: trading at a price that is different from the real fair value at that time. Careful mechanism design is needed: the predictable, deterministic nature of the vault’s trading pattern make it vulnerable to front-running (e.g., buying ahead of the vault and selling behind it). In Tradfi there is a whole industry trying to trade ahead of lumbering giants like SPY ($600bn+) and QQQ ($300bn+).
• Volatility decay: The least intuitive one. This refers to the tendency of levered products to underperform their target due to the volatility in the underlying instrument. In a range-bound market that trades up and down with little overall directional trend, the vault will tend to ‘buy high’ (price goes up, leverage goes down, time to buy) and sell low (price goes down, leverage goes up, time to buy):

The above sounds unpleasant, but it’s the necessary price to pay for in-built liquidation protection, which is a great feature: if we are levered long and the price starts going down, the vault will start selling so we can stay in the fight and not go broke. 

For very volatile products like crypto, it makes sense to carefully study acceptable leverage bands that let us faithfully track the underlying while minimizing trading costs and volatility decay.

Conclusion

As you can see, the best of Synthetix’s storied DeFi pedigree has been brought to bear on the surprisingly deep question of how to build a leveraged token. A carefully designed product will:

• Offer the discerning DeFi user a convenient, safe, one-click way to gain a levered exposure that is fungible, transferrable (can be sold or gifted to a friend), and composable (can be used in DeFi as collateral to borrow against and more).
• Target a leverage level that is exciting, mindful of the tracking error described above. This error means these tokens are best used as short or medium-term ways to get a lot of price exposure.
• Carefully think about fees, leverage management, and the underlying Defi protocols at play to achieve its financial objectives in a way that is safe, fair, and transparent.

You can experience Synthetix Leveraged Tokens now on leverage.synthetix.io – but stay tuned, we’ll be releasing V3 Leveraged Tokens on Base shortly, along with a promotion to celebrate the launch. Be sure to join our new Telegram channel for this and all major Synthetix developments.

To learn more about Synthetix Leveraged Tokens, see our docs.

After a second successful acquisition, Synthetix has fast-tracked and launched its newest derivatives product, Synthetix Leveraged Tokens, designed to simplify access to leverage in crypto markets. Highlights include a new deployment on Base with Synthetix V3, a range of new leveraged tokens, and an incentive campaign to celebrate the launch. 

What are Leveraged Tokens?

Leveraged tokens are ERC-20 tokens that offer leveraged exposure to an underlying asset while maintaining the leverage factor within a targeted range. In contrast to conventional perpetual futures, leveraged tokens are transferable, auto-rebalancing, non-liquidating, and require no margin management by the holder. 

Leveraged tokens make leveraged long or short exposure to crypto assets as easy as possible. Traders can simply select their asset of choice, whether to go long or short, their desired leverage factor, and mint the token. Leveraged tokens will either gain or lose value depending on the underlying asset movement from the time of minting and can be redeemed at any time for USDC or sUSD. To learn more about Synthetix Leveraged Tokens, see our docs or our recent explainer article.

Product Lineup

V2 OP Leveraged Tokens

Long and short:

• BTC 1, 2, 3, 4, 5, 7x
• ETH 1, 2, 3, 4, 5, 7x
• SOL 1, 2, 3, 4, 5x
• PEPE 2, 5x
• LINK 2, 5x
• ETH/BTC 2, 5, 10x 
• DOGE 2, 5x
• RUNE 2, 5x 
• OP 2, 5x 
• SUI 2, 5x 
• SEI 2, 5x 

V3 Base Leveraged Tokens

Long only, with short coming soon:

• BTC 3x
• ETH 3x
• SOL 3x
• XRP 3x
• TRUMP 3x
• PEPE 3x
• WIF 3x
• DOGE 3x
• FART 3x
• BONK 3x

A five-week incentive campaign to commemorate the launch of Synthetix Leveraged Tokens begins today. 

USDC and OP Rewards

A total of 150,000 USDC and 75,000 OP will be distributed pro-rata over five weeks according to fees paid while minting and redeeming Leveraged Tokens. 

To participate, simply mint Synthetix Leveraged Tokens of any size during the promotional period, Jan. 21st 00:00 UTC – Feb. 25th. You can view your progress on the Leaderboard, and rewards earned each week will be claimable via the Rewards tab. These rewards will remain claimable for a period of 28 days after the end of the Rally.

For full details, see: https://blog.synthetix.io/synthetix-leveraged-token-rally/

Visit https://leverage.synthetix.io/ to get started with Synthetix Leveraged Tokens and earn your share of the rewards.

For all updates regarding Leveraged Tokens, join the Synthetix Discord and follow Synthetix on X and Telegram. 

Leveraged tokens and perpetual futures represent two distinct approaches to achieving leveraged exposure. At the heart of leveraged tokens’ unique behavior lies their rebalancing mechanism, designed to maintain leverage within a targeted range. This contrasts with perpetual futures, where the leverage factor fluctuates in tandem with the price movements of the underlying asset.

But beyond the mechanics, how do these instruments fare in the real world? Which scenarios favor the performance of one over the other? And importantly, how can one use this knowledge to select the most appropriate instrument for their needs?

This article delves into these questions by examining various historical price scenarios and directly comparing the outcomes. The goal is to illuminate the nuances of each option, helping users to make informed decisions in the evolving landscape of leveraged DeFi products.

Scenario one: Trending markets

Trending markets, characterized by clear and consistent upward or downward price movements, provide an excellent example of the distinct behavior between leveraged tokens and perpetual futures. Recent instances of such trends include the Solana rally, where its value surged from $20 to $200, and the Bitcoin rally, with its price increasing from $27,000 to $73,000, both of which unfolded between October 2023 and March 2024.

In Figure 1, the performance comparison between the leveraged token (pink line) and the perpetual future (grey line) demonstrates a clear advantage for the leveraged token. The underlying mechanism responsible for this outperformance is the rebalancing process, marked by blue vertical lines. Rebalancing automatically adjusts the position’s notional value – essentially the total size of the leveraged exposure – whenever the leverage factor hits a specific threshold. This adjustment leads to increased exposure, which in turn amplifies returns as the price continues to rise.

In this particular example, the perpetual future’s leverage factor had decreased from 2x to 1.06x with a notional of $18,399 by March 18th. The leveraged token’s leverage factor, on the other hand, remained around 2.02x with a notional of $96,144, showcasing the potential benefits of leveraged tokens under these market conditions.

Scenario two: Price movements that trigger liquidations

In contrast to the behavior of leveraged tokens in scenario one, their performance during adverse price movements reveals a different advantage. In such scenarios, the rebalancing mechanism decreases the notional value, leading to reduced leveraged exposure. This significantly mitigates the risk of liquidation by decreasing exposure during downturns.

Perpetual futures, however, do not share this rebalancing feature. They exhibit a fluctuating leverage factor until the market reaches a liquidation price.

Figure 2 illustrates such a scenario. The decrease of the $LINK price during the first week of January 2024 led to the liquidation of the perpetual future shortly after the position was opened.

In contrast, the leveraged token, although experiencing a margin decrease similar to that of the perpetual future, underwent multiple rebalancings throughout the downturn. These rebalancing actions effectively reduced the amount of borrowed funds, thereby decreasing leveraged exposure and preventing liquidation. This mechanism allowed the leveraged token to maintain its position throughout the period of declining prices, showcasing the risk management capabilities inherent in the structure of leveraged tokens.

Scenario three: Flat and volatile price movements

The first two scenarios provided insights into market conditions where leveraged tokens tend to outperform perpetual futures. However, rebalancing also introduces a potential downside in certain market environments. Specifically, in markets characterized by flat or volatile price movements, where the need for frequent rebalancing – both uplevering and downlevering – can result in what is known as volatility decay. The mathematical foundation underlying this process is explained in the official Synthetix Documentation under the section “Volatility decay”.

Perpetual futures do not face this issue and usually outperform leveraged tokens under these market conditions, given they don’t get liquidated.

Figure 3 depicts a scenario of continuous sideways movement and high volatility in the $LINK price. It clearly demonstrates the depreciating margin of the leveraged token over time, leading to underperformance compared to the perpetual futures contract. The impact of volatility decay on the leveraged token would be further intensified by higher leverage factors, highlighting the challenges leveraged tokens face in volatile, directionless markets.

Scenario four: Continuous adverse price development

In scenarios with continuous adverse price movement, rebalancing can mitigate but not prevent the impact on the margin. Should the price of an underlying asset persistently move against a position, the margin of a leveraged token will inevitably decay over time. This highlights the limitation of rebalancing in safeguarding a position against prolonged unfavorable market trends.

Figure 4 showcases the dynamics of a short position during the price appreciation of $ETH from February to mid-March 2024. The perpetual future faced liquidation at the beginning of March. In contrast, by March 15th, the leveraged token had still preserved 30% of its margin. However, should this upward trend continue, the margin of the leveraged token would decay almost entirely, illustrating the gradual impact of adverse price movements on leveraged token positions.

Conclusion

Leveraged tokens and perpetual futures each shine under different market conditions. Leveraged tokens outperform in trending markets thanks to their rebalancing mechanism and offer protection against liquidation in adverse movements. However, this same feature leads to volatility decay in flat or volatile markets, where perpetual futures tend to excel, assuming they avoid liquidation. While leveraged tokens can mitigate losses in downturns, prolonged adverse trends can still erode their margin. Users must consider these dynamics, balancing the potential for amplified returns against the risks of volatility decay and market movements, to choose the right instrument for their strategy.

Disclaimer

This article is for informational purposes only and is not intended as financial or investment advice. All content reflects the author’s views and should not be seen as specific investment recommendations. Investors should do their own due diligence or consult a professional advisor before making investment decisions. The author bears no responsibility for any financial losses resulting from investment choices based on this article.

The model used for generating the charts excludes funding rates and fees for both leveraged tokens and perpetual futures. This exclusion shouldn’t notably affect the performance comparison.