The U.S. Securities and Exchange Commission (SEC) approved the listing and trading of Bitcoin spot ETF options on the Nasdaq after approving asset management giant BlackRock in September, and yesterday (19th) also approved the Bitcoin spot ETF options application of the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE).
According to reports, the SEC's approval is just the first stage, and the final listing still needs to be approved by the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC) in the United States.
Extended reading:
Great news! The SEC approves BlackRock's Bitcoin ETF "options trading", Bitwise is optimistic about restarting the bull market
Options are a type of financial derivative that give the holder the right (but not the obligation) to buy or sell an asset at a predetermined price at a specific time in the future. Options are often used as a risk management tool to hedge against market volatility, or as a speculative tool to profit from changes in asset prices.
Multiple Bitcoin spot ETF issuers can trade options
According to
Cointelegraph, a total of 11 Bitcoin spot ETF issuers have been approved to trade options on the New York Stock Exchange, including: Fidelity Wise Origin Bitcoin Fund, ARK21Shares Bitcoin ETF, Invesco Galaxy Bitcoin ETF, Franklin Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree's Bitcoin Fund, Grayscale's Bitcoin Trust,
Grayscale Bitcoin Mini Trust, Bitwise Bitcoin ETF, BlackRock's iShares Bitcoin Trust ETF, and Valkyrie Bitcoin Fund.
In addition, the Chicago Board Options Exchange also filed a rule change application in August 2024 to include Bitcoin spot ETF options in its trading scope. This regulatory policy change will classify Bitcoin spot ETF options in the same category as other commodity-type ETFs. However, it is understood that Grayscale's Bitcoin Mini Trust is the only exception.
The impact of options on Bitcoin
Furthermore, according to a previous
report, Bitwise Alpha's chief investment strategist, Jeff Park, published an article after BlackRock was approved by the SEC, explaining the impact of options on the Bitcoin market.
The article first points out that the nature of the regulated options market and Bitcoin, the powerful combination of the two, marks the most important progress in the crypto market to date.
The article then states that while the limited supply is an advantage of Bitcoin, this also limits Bitcoin's widespread adoption to provide market efficiency. However, with the opening of the options market, Bitcoin can now increase leverage through options, thereby improving market efficiency.
In addition, when market makers short Gamma, causing a Gamma squeeze, Bitcoin prices will experience abnormal spikes, and the continued rise in prices will become more intense, as traders will be forced to buy more at higher prices.
Shorting Gamma refers to the fact that the trader's option position will increase their risk as the market price fluctuates. This usually means that when the underlying asset price rises, the trader must constantly buy more of the underlying asset to hedge their position, and when the price falls, they need to sell more, exposing them to greater risk in the event of violent market fluctuations. This situation is easy to trigger the so-called Gamma squeeze, further driving violent price fluctuations.
On the other hand, Tom Dunleavy, managing partner of MV Global Investments, believes that the introduction of options will also become a mechanism to reduce the high volatility of Bitcoin and smooth out market fluctuations over time.
