On October 18, the US Securities and Exchange Commission (SEC) approved applications from the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE) to list highly anticipated spot Bitcoin options. The approval includes ETFs for 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 submitted a request to list options for the spot Bitcoin ETF providers in August 2024 via a proposed rule change. This change in regulatory policy puts Bitcoin ETF options in the same category as other commodity-based ETFs approved by the SEC for listing on the CBOE, with the exception of Grayscale’s Bitcoin Mini Trust.
Effects on the markets due to increased liquidity and potential short squeezes. Investors believe that the introduction of options for Bitcoin ETFs will inject much-needed liquidity to the Bitcoin markets – a potential catalyst for higher price action. Bitwise CEO Jeff Park argued that the approval of options for the ETF products represented a massive upgrade from LedgerX and Deribit, which have no central guarantors. Park also hinted at the options’ potential to create situations where highly leveraged short traders are short-squeezed and forced to buy Bitcoin to cover their positions.
According to the managing partner of investment firm MV Global Tom Dunleavy, the introduction of options also acts as a mechanism to dampen Bitcoin’s high volatility and smooth out the markets over time.
SOURCE