March 27, 2024
SEC Delays Verdict on Options Trading for Bitcoin ETFs, Institutional Entry Awaited
Bitcoin ETF

SEC Delays Verdict on Options Trading for Bitcoin ETFs, Institutional Entry Awaited

In a move with significant implications for the cryptocurrency market, the United States Securities and Exchange Commission (SEC) has postponed its decision to approve options trading on spot Bitcoin ETFs. This decision delay could potentially open the floodgates for increased institutional investment into Bitcoin.

According to a filing on March 6, the SEC has extended its response time to the Cboe Exchange and the Miami International Securities Exchange regarding their proposals to offer options on Bitcoin ETFs. Additionally, the agency deferred its decision on Nasdaq’s bid to offer options on BlackRock’s iShares Bitcoin Trust (IBIT), citing the need for “sufficient time to consider” the request.

The filings from the exchanges, submitted on January 25, prompted the SEC’s initial decision deadline on March 10, as mandated by U.S. securities laws, which provide the agency with 45 days to decide or defer a decision on such matters. The deferral grants the SEC an additional 45 days, up to the maximum allowable period of 90 days under the law, with the final decision now expected by April 24.

Options, which are derivative products, enable traders to leverage their positions and make directional bets on the market. For instance, a trader anticipating an increase in Bitcoin’s price could purchase a “call option,” agreeing to buy 1 BTC at today’s price in a month by paying a premium, thus requiring less capital compared to directly buying 1 BTC. If the price of Bitcoin rises during the month, the trader can exercise the option, potentially profiting from the price difference. Conversely, if the price falls, the trader may opt to let the contract expire, forfeiting the premium paid.

Grayscale CEO Michael Sonnenshein has advocated for the approval of options for Bitcoin ETFs, asserting that they “contribute to a robust and healthy market.” VettaFi analyst Dave Nadig highlighted the potential impact of Bitcoin ETF options, suggesting that their introduction could attract hedge fund players who were previously not directly involved in the crypto ecosystem.

The SEC’s approval of 10 spot Bitcoin ETFs on January 11 marked a significant milestone, following months of delays. These ETFs have already attracted substantial investment, with nine of them, excluding Grayscale’s, amassing $25.87 billion in assets under management, according to BitMEX Research data as of March 6.

While the SEC grapples with Bitcoin ETF options, it also faces decisions on seven spot Ether ETFs. Analysts anticipate the agency to hold off until May 23 to approve them all, coinciding with the deadline for VanEck’s application.

In addition to ETFs, the SEC is evaluating multiple leveraged Bitcoin ETFs, including proposals from Direxion, ProShares, and REX Shares, further underscoring the growing interest from institutional investors in cryptocurrency markets.


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