XRP ETF Went Live Automatically, Not Approved, Analyst Explains

The first XRP ETF in the United States has gone live. But not in the way many investors expected. The Teucrium 2x Long Daily XRP ETF (XXRP) launched automatically after the SEC’s regulatory deadline expired during a government shutdown. Analysts caution that this ETF was not directly approved by the SEC, highlighting an unusual process in U.S. markets.

How the XXRP ETF Works

The Teucrium XXRP ETF provides 2x leveraged exposure to XRP’s daily price movements. It does not hold XRP directly. Instead, the fund achieves its target through swap agreements and futures contracts. It uses European exchange-traded products as reference rates. Investors can gain amplified exposure without needing a crypto wallet, futures account or direct custody. 

The fund is designed for short term tactical trading. As it resets its positions daily. Due to compounding effects, returns may diverge from twice XRP’s cumulative performance over time. As of October 3, XXRP’s market price stood at $35.76, down 3.9% from the previous close. Despite the drop, the fund has already attracted over $300 million in net flows. This signals strong interest from U.S. traders seeking leveraged XRP exposure.

Analyst Insights on ETF Approval

Kyledoops, host of the technical analysis show Crypto Banter, explained the unusual ETF launch. According to him, “ETF approvals aren’t all created equal.” The Teucrium XXRP ETF went live automatically under the Investment Company Act of 1940. It means silence from the SEC was treated as compliance. This contrasts with spot ETFs, such as those for LTC, SOL or XRP. These require direct SEC approval before they can launch. 

Futures based ETFs often “sneak through” during regulatory delays. As happened with XXRP. The process has raised questions about whether the SEC will approve other spot ETFs. Once it resumes normal operations after the shutdown. Analysts note that leveraged products like XXRP carry high risk due to volatility, daily resets and potential market illiquidity.

Key Features and Risks

XXRP targets double the daily return of XRP. If XRP rises 1% in a day the fund seeks a 2% gain. Conversely, a 1% decline results in a 2% loss. Daily rebalancing amplifies gains and losses. Holding positions overnight introduces additional risk from market moves between the close and the next day’s open. The fund also issues a Form 1099 for tax reporting. This makes it more accessible to U.S. investors. Without the complications of direct crypto ownership or futures accounts. But it is explicitly not intended for long term holding. Investors should carefully read the fund prospectus to understand leverage, risks and daily resets.

Market Impact

The launch of XXRP marks a significant milestone for XRP exposure in the U.S. Even without direct SEC approval. Leveraged investors now have a regulated vehicle to trade XRP price movements. It potentially increases liquidity and market participation. While spot XRP ETFs remain pending. The XXRP ETF highlights the growing interest in digital asset investment products. It also shows the evolving regulatory landscape.

Traders and institutional investors are watching closely. The SEC’s next decisions could influence the broader adoption of XRP and other digital assets in traditional finance. The Teucrium XXRP ETF provides an innovative way for traders to engage with XRP. While navigating regulatory uncertainty. Experts caution that leveraged exposure carries amplified risks. Careful management is required for anyone participating in this new market offering.