After months of inactivity, applications to list options on spot Bitcoin (BTC) exchange-traded funds (ETFs) are finally attracting regulatory attention. We can expect BTC ETF options to begin trading on US exchanges later this year, with options on Ethereum (ETH) ETFs to follow soon after.
Options contracts, which give the right to buy or sell an underlying asset at a specified price, are popular for hedging and speculation. Although the launch of BTC ETFs in January was highly anticipated, the addition of options trading is also significant. Options are essential for institutional investors, particularly with the volatility of crypto ETFs. If current trends hold, spot BTC ETF options are expected to create a substantial market.
Regulators have been slowly warming up to the idea of Bitcoin ETF options. In January, the New York Stock Exchange (NYSE) Arca, Cboe, and Nasdaq requested permission from the Securities and Exchange Commission (SEC) to list options on spot BTC ETFs. The SEC responded with silence, and industry feedback was mixed. In May, Better Markets Inc. urged the SEC to proceed with caution, citing potential risks similar to the 2021 GameStop stock frenzy.
The SEC’s response has been cautious, requesting additional time to make a decision in March, April, and July. Recently, Cboe submitted an amended application addressing concerns about market manipulation and position limits. Bloomberg Intelligence analyst James Seyffart noted that this indicates progress, with the SEC likely providing some feedback.
Bloomberg forecasts that spot BTC options could be launched in the fourth quarter, possibly before November due to election-year pressures on the SEC. Spot ETH ETFs are expected to follow, with Nasdaq recently requesting approval to list options on BlackRock’s iShares Ethereum Trust (ETHA).
Currently, US investors can trade options on Bitcoin ETFs that use futures contracts to track BTC’s price, though these ETFs generally underperform spot market equivalents. Despite this, the market for options on BTC futures ETFs is thriving, with open interest exceeding $3.25 billion as of August 9. In comparison, the net asset value of all BTC futures ETFs is around $4.3 billion, indicating a robust market for these options.
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Spot BTC ETFs hold a significantly larger asset base, over $58 billion as of August 9. If the market for BTC futures ETF options is any indicator, there is potential for a nearly $45 billion new market for BTC options.
The introduction of options is a crucial step toward broader crypto adoption. Financial advisors, who manage a substantial portion of ETF investments, rely on options for managing market volatility. More than 10% of advisors used options to manage client portfolios in 2023. Options are also integral to hedge fund strategies and, with firms like Morgan Stanley endorsing spot BTC ETFs, will likely attract more institutional capital.
Cre: cointelegraph
I’m Jessi Lee, currently living in Singapore. I am currently working as a trader for AZCoin company, with 5 years of experience in the cryptocurrency market, I hope to bring you useful information and knowledge about virtual currency investment.
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