Bitcoin ETF options could increase Wall Street action and volatility, analyst says

Bitcoin ETFs have already generated billions of dollars on Wall Street this year. But analysts say the addition of options following recent regulatory approvals could spark a new wave of institutional interest.

On Friday, the Securities and Exchange Commission (SEC) approved the listing and trading of options on 11 Spot Bitcoin ETFs. Most of the products were approved in January, resulting in a nod in cumulative net inflows. Swelled to over $20 billion For last week's group.

For products listed in new york stock exchangethe endorsements included Fidelity Wise Origin Bitcoin Fund and Grayscale Bitcoin Trust. in seaboeWisdomTree Bitcoin Fund, Franklin Bitcoin ETF, and VanEck Bitcoin Trust were among those given the green light.

From an institutional investor perspective, ETF options make participating in the Bitcoin market easier, cheaper and more secure, said Bitwise CIO Matt Hogan. decryption. Options, as financial derivatives, give investors the right to buy or sell an asset at a specific price within a specific period of time.

“Every time Bitcoin adds to the normal things that apply to other assets, it’s a long-term win,” Hogan said in a statement. “I think this is another brick in the wall of normalcy, but we should be happy about this.”

Bitcoin futures were introduced on the Chicago Mercantile Exchange in 2017, but the options are different. Futures require the buyer of a contract to purchase the underlying asset on a specific date, while options give the buyer the right, but not the obligation, to purchase the asset.

“For institutional investors, being able to view options is [Bitcoin] It's much more capital efficient and easier to get exposure to than futures-based positions,” said Juan Leon, senior investment strategist at Bitwise. decryption In an interview.

BlackRock's Spot Bitcoin ETF, which has an industry-leading market cap of $26 billion, received similar treatment to the group of ETFs on Friday late last month. Listed on NASDAQ and SEC Approved options Listing and trading of subsequent products delay decision In March.

Leon said options generally lead to increased trading activity, which increases liquidity and helps improve price discovery. At the same time, he explained that options can lead to greater volatility in the price of Bitcoin on the expiration date of the contract.

“Options are essentially leveraged positions,” Leon said. “When you have large concentrated positions at a certain price and expiration date, and they expire, you can experience a surge in liquidations.”

For some experts, the SEC's approval of options is more than just a market trend. A more efficient Bitcoin market may benefit investors, but it's also an “exciting signal of regulatory progress,” said Krista Lynch, vice president of ETFs at Grayscale. decryption In a statement.

However, Lynch said that the SEC's approval “This does not mean that options trading will begin immediately, as other steps in the regulatory process are still progressing. The Options Clearing Corporation then said it would work with the Commodity Futures Trading Commission (CFTC) to obtain further approvals.

This step was recently referenced by Bitcoin company NYDIG, research notes How this hurdle derailed platinum and palladium ETF options in 2010. Still, the company concluded that the Bitcoin market will be viewed differently by the CFTC.

“Options trading may occur in IBIT and possibly other Bitcoin ETFs by the end of the year,” the paper wrote.

Edited by Andrew Hayward