Crypto
Leverage Got Its Approval While the Tax Man Started Reading
This was the week crypto stopped pretending it was still a startup. The SEC signed off on triple leveraged Bitcoin and Ether products, the Treasury started reading the tax plumbing of the ETF machine, a once mighty Layer 2 announced it was packing up, and Wall Street kept buying Bitcoin through ETFs at a calmer, steadier pace. Every one of those stories is about infrastructure growing up, and infrastructure growing up is exactly what turns a volatile experiment into a lasting financial layer.
On October 2 the Securities and Exchange Commission approved a Cboe BZX rule change allowing six triple leveraged exchange traded products from Volatility Shares to list. The lineup covers Bitcoin and Ether alongside gold, silver, oil, and natural gas, each designed to deliver three times the daily performance of its underlying asset through regulated futures contracts. The crypto products will track CME futures rather than holding coins directly. Listing approval is a first step rather than a finish line, since each fund still needs its S-1 registration to become effective before trading can begin. Bloomberg Intelligence analyst Eric Balchunas called the decision a big win for Volatility Shares, and it marks a shift in how the regulator treats crypto exchange traded products. The same week, spot Ether ETFs were seeing outflows for a fourth straight day, a reminder that leveraged wrappers create trading tools while steady demand still comes from the spot side.
While leverage was getting the green light, the tax side of the ETF machine got a close read. On September 28 the Treasury Department and the IRS issued Notice 2026-62, putting fund managers on notice that some in kind redemption strategies may be stretching tax provisions beyond their intended purpose. The notice targets arrangements where regulated investment companies hand investors appreciated property in redemptions, and a companion Revenue Ruling 2026-20 rejects prearranged Section 351 transactions that let investors contribute appreciated securities and redeem out with a different portfolio. Treasury Secretary Scott Bessent said plainly that existing law gives these conversions a clear answer already, and the agencies warned that resulting rules could apply retroactively. The notice asks for written comments by October 28. The scale of the plumbing under review is serious. BlackRock IBIT distributed about 5.49 billion dollars of Bitcoin through in kind redemptions in the first half of 2026, while its ETHA distributed another 1.72 billion dollars of Ether, for a combined 7.22 billion dollars. Those figures show the size of the infrastructure, with the careful caveat that both products are grantor trusts, so the income test at the center of the notice leaves their structure untouched. Clearer rules give every fund building for the long term firmer ground to stand on.
On the Ethereum side of the map, Blast announced on October 2 that it is winding down its Layer 2 network. The team said the cost of running the chain now exceeds the revenue it generates, and the road back to sustainability has closed for good. Users have until October 26 to withdraw through the normal interface, after which assets remain recoverable by interacting directly with the bridge contracts on Ethereum mainnet. The team first needs about a week to unwind its Lido staked positions, during which withdrawals pause, and the withdrawal waiting period will then shrink to 24 hours. The arc here is worth sitting with. Blast raised 20 million dollars led by Paradigm and Standard Crypto, opened deposits in November 2023, drew nearly 200,000 early users and more than 2 billion dollars in deposits on the promise of native yield plus a points program, and peaked near 2.2 billion dollars in total value locked in June 2024. DeFiLlama figures now put that figure a little over 32 million dollars, with monthly revenue under 2,000 dollars, and the BLAST token trades roughly 98 percent below its launch level. Chains built on yield incentives and airdrop expectations can fill up fast, and the bills for sequencers and infrastructure keep arriving after the crowd leaves. Ethereum mainnet remains the settlement home for the assets coming back, which is exactly how a layered system is supposed to work when one layer steps aside.
Through it all, the institutional bid kept showing up. Spot Bitcoin ETFs pulled in roughly 6.3 billion dollars across the third quarter, with about 2.7 billion of that arriving in September alone. The first week of October ran cooler, with about 83 million dollars of net inflows against 2.39 billion the week before, and daily ETF trading value has eased from 4.57 billion dollars on September 21 to under 2 billion. Bitcoin has been holding the mid 80,000s, closing the week near 86,800 dollars, with Ether around 2,700 dollars. The tape reads like accumulation with patience rather than a rush, which tends to build stronger foundations than spikes do.
Put the pieces together and the picture is a market assembling real financial furniture. Leveraged products give traders sharper tools, tax guidance gives funds firmer ground, a fading Layer 2 returns its capital to the main chain, and steady ETF demand keeps a bid under the whole structure. For readers holding their own keys and thinking in years rather than weeks, this is the kind of week that matters most. The plumbing gets better, the rules get clearer, and Bitcoin and Ethereum keep doing exactly what they were built to do.
Quick answers
What is this story about?
This was the week crypto stopped pretending it was still a startup. The SEC signed off on triple leveraged Bitcoin and Ether products, the Treasury started reading the tax plumbing of the ETF machine, a once mighty Layer 2 announced it was packing up, and Wall Street kept buying Bitcoin through ETFs at a calmer, steadier pace. Every one of those stories is about infrastructure growing up, and infrastructure growing up is exactly what turns a volatile experiment into a lasting financial layer.
Why does this story matter?
Put the pieces together and the picture is a market assembling real financial furniture. Leveraged products give traders sharper tools, tax guidance gives funds firmer ground, a fading Layer 2 returns its capital to the main chain, and steady ETF demand keeps a bid under the whole structure. For readers holding their own keys and thinking in years rather than weeks, this is the kind of week that matters most. The plumbing gets better, the rules get clearer, and Bitcoin and Ethereum keep doing exactly what they were built to do.
Sources
New to crypto? Read the crypto glossary, browse frequent questions, read our story, or explore the story archive.