On Oct. 18, the United States Securities and Exchange Commission (SEC) approved applications from the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE) to list the long-anticipated options for spot Bitcoin (BTC) exchange-traded funds (ETFs).
Options trading will now be available for the 11 approved ETF providers on the NYSE, 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 the Valkyrie Bitcoin Fund.
The Chicago Board Options Exchange also filed an application to list options for the spot Bitcoin ETF providers in August 2024 through a proposed rule change. This change in regulatory policy puts Bitcoin ETF options in the same category as other commodity-based ETFs, which the SEC approved to be listed on the CBOE, with the exception of Grayscale’s Bitcoin Mini Trust.
Related: SEC again delays decision on spot Ethereum ETF options
Effects on markets through increased liquidity and potential short squeezes
Investors believe the introduction of options for Bitcoin ETFs will inject much-needed liquidity into the Bitcoin markets — a potential catalyst for higher price action.
Bitwise executive Jeff Park argued that the approval of options for the ETF products represented a massive upgrade from LedgerX and Deribit, which lack central guarantors.
Park also hinted at the potential for the options to create situations in which highly overleveraged short traders are “short-squeezed” and forced to buy up Bitcoin to cover their positions:
“Saying you can’t short squeeze a trillion-dollar asset is like saying you can’t make an elephant dance. Sure, it’s huge, but if you tie enough ropes to its legs and pull hard enough, even the biggest creature can be moved in ways it doesn’t want.”
According to the managing partner of investment firm MV Global Tom Dunleavy, the introduction of options also acts as a mechanism to dampen the high volatility of Bitcoin and smooth out markets over time.
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