By George Ward
Institutional demand for Bitcoin would likely be high in the coming weeks following the launch of spot Bitcoin ETFs. Accordingly, observers believe digital assets could have a bullish 2024 if investors and asset managers continue to view them as a powerful and institutional-level asset class.
Approving Bitcoin ETF Option Trading
Reports indicate that the US Securities and Exchange Commission (SEC) has approved applications from Nasdaq and the Chicago Board Options Exchange (CBOE) to introduce options trading for Bitcoin (BTC) exchange-traded funds (ETFs). Nasdaq has requested a regulatory modification to make listing and trading options related to BlackRock’s iShares Bitcoin Trust more efficient.
At the same time, the CBOE asked for a license to trade options on exchange-traded products for Bitcoin. It is worth noting that CBOE has already successfully debuted six of the ten Bitcoin ETFs recently approved by the regulator.
Meanwhile, trading in Bitcoin ETFs began on the Nasdaq and CBOE platforms on January 11, following the SEC’s approval the previous day. While providing insights on market trends following the product’s debut, Catherine Clay, CBOE’s Executive Vice President, stated that the exchange saw “positive inflows” in Bitcoin ETFs.
It is worth noting that the recently approved ETFs closely tracked changes in the price of Bitcoin. As a result, traditional financial institutions such as Nasdaq and CBOE have begun to offer trading options for Bitcoin-related products. This development is a significant step toward widening the investment opportunities in cryptocurrencies.
Improving Utility and Mitigating Risks Via Options
Furthermore, the CBOE executive described options as the “next logical step” for Bitcoin ETFs. She opined that BTC ETF options trading would improve the usability and risk management of these financial instruments.
Nasdaq echoed a similar sentiment by indicating in its applications that options will result in cost-effective and increased hedging opportunities for institutional players. As financial derivatives, options allow the holder to buy or sell an asset at a defined price within a set time frame.
Earlier this week, Dave Nadig, an analyst at VettaFi, revealed in an interview that these approvals would change the investment environment significantly. He remarked, “I believe you will see many hedge fund players in the BTC ETF options sector.” Nadig highlights the possibility of surging market activities as hedge fund players enter the BTC ETF options arena.
Awaiting Regulatory Decision
Furthermore, Clay disclosed that CBOE had submitted filings with the SEC to list options, but it is still awaiting the regulator’s decision on its application. She acknowledged the uncertainties surrounding the approval process, highlighting the difficulty of anticipating whether approval would be granted.
Clay said that CBOE’s options clearing firm has submitted similar filings to the SEC and the Commodity Futures Trading Commission (CFTC) and is awaiting the regulator’s decision. Meanwhile, Bloomberg ETF analyst James Seyffart predicted that approval for options trading could come as early as the end of February, even though there are speculations that September 21 is a more realistic date.
Nevertheless, the proposals will be subject to a 21-day comment period following publication in the Federal Register. Thus, this timeframe will allow stakeholders and interested parties to provide feedback on the proposals, allowing for a thorough examination before regulatory decisions.