- It is anticipated that before 2025, Bitcoin ETF options will start trading in the US.
Regulators are finally paying attention to applications that have been collecting dust for months—that is, applications to list options on spot Bitcoin tickers down exchange-traded funds (ETFs). This year, BTC ETF options should begin trading on US markets. Soon, Ethereum ticker down ETF options will be released.
Contracts known as options provide traders the right to purchase or sell an underlying asset at a specific price, or to call or put the asset. They are appealing tools for hedging; wouldn’t it be nice to have the option to sell Bitcoin at $73,000 locked in? and are well-liked by traders as well.
In light of the eagerly anticipated January launch of Bitcoin ETFs, the addition of options trading may seem trite. It is completely untrue to say that. For institutional acceptance to occur, options are essential, particularly for extremely volatile crypto ETFs. Furthermore, there will be a sizable market for spot BTC ETF options if current crypto options are any guide.
Governments are becoming more receptive to Bitcoin ETFs
The Securities and Exchange Commission (SEC) was contacted in January by the three US stock exchanges, Nasdaq, Cboe, and the New York Stock Exchange (NYSE) Arca, to inquire about the possibility of listing options on spot BTC ETFs.
The public response to the applications was uninspiring, and the SEC met them with a dead silence. Better Markets Inc., a private industry watchdog, encouraged the SEC to proceed with extra caution in May, citing the potential for catastrophic harm from the unavoidable marketing of such options to retail investors, as demonstrated by the 2021 GameStop meme stock frenzy.
Seemingly taking this to heart, the SEC requested further time in March, April, and July to reach a decision. At last, the ice is melting. Cboe submitted an updated application to the SEC on August 8. It covers topics like position limitations and market manipulation in more detail and is nearly three times longer than the first.
According to a post on X by Bloomberg Intelligence analyst James Seyffart, there’s undoubtedly some movement on Bitcoin ETF choices. Most certainly, the SEC provided input of some kind.
According to Bloomberg, spot Bitcoin options should launch in the fourth quarter. It’s conceivable that the SEC will act before November given the demands of election year. Spot ETFs for ETH will do the same. Nasdaq requested authorization from the SEC to list options on BlackRock’s iShares Ethereum Trust (ETHA) in a document dated August 6.
Establishing a new market
US investors, meanwhile, are free to trade options on a distinctly inferior class of Bitcoin ETFs: those that use futures to artificially track the price performance of BTC.
Because rolling over monthly futures contracts adds to the expense of the investment, futures ETFs typically perform worse than their spot market equivalents. The most well-known Bitcoin futures ETF, ProShares’ Bitcoin Strategy ETF (BITO), underperformed the market by roughly 2.6% between January and May, according to cryptocurrency researcher K33 Research.
The market for these possibilities is booming, provided there are no better options available. Based on the notional value of all current call and put contracts, open interest on Bitcoin futures exchange-traded funds (ETFs) exceeded $3.25 billion as of August 9 market close, according to statistics from The Options Clearing Corporation, a self-regulatory organization (SRO) for the sector.
In contrast, Yahoo Finance data indicates that the total net asset value of all BTC futures exchange-traded funds (ETFs) is roughly $4.3 billion. Stated differently, the market for options on Bitcoin ETFs is nearly as big as the market for the actual Bitcoin ETFs.
As of August 9 market close, spot BTC ETFs have an asset base of about $58 billion, which is a far greater amount. A roughly $45 billion new Bitcoin market is just ready to emerge, if the options on BTC futures ETFs are any indication.
An important turning point for widespread adoption
That isn’t merely a significant amount. Options are a vital component of the market architecture and a significant stop along the route to widespread cryptocurrency adoption.
Options are used by financial advisers, who manage up to half of the $9 trillion ETF market’s investment flows, as a hedge against volatile markets such as the 28% decline in Ether’s spot price on August 5. According to a poll conducted by The Journal of Financial Planning, as of 2023, over 10% of advisers actively managed client portfolios using options.
Additionally, options are essential to hedge fund techniques like the covered strangle recommended by investment research firm 10x Research.
With over $3.75 trillion under management, Morgan Stanley is the largest financial advice firm. It has already given its 15,000 advisers permission to recommend spot Bitcoin exchange-traded funds (ETFs) to clients. Institutional capital will only find spot BTC ETFs more appealing with options.
You can already hear the investment flows coming in if you pay close attention.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
