Bitcoin ETF options could increase the action on Wall Street—and volatility, analysts say

Bitcoin ETFs have made a multi-billion dollar splash on Wall Street this year. But analysts say a new wave of institutional interest could enter as options increase following recent regulatory approvals.

On Friday, the Securities and Exchange Commission (SEC) approved the listing and trading of options for 11 spot Bitcoin ETFs. Most of the approved products in January, the node came as a net net flow It swelled to more than 20 billion dollars For the team last week.

For the products listed above New York Stock ExchangeThe approvals include the Fidelity Wise Origin Bitcoin Fund and the Gray Bitcoin Trust. on the CboeAmong those given the green light are the Wisdomtree Bitcoin Fund, the Franklin Bitcoin ETF and the VanEyck Bitcoin Trust.

From the perspective of institutional players, options on ETFs make it easier, cheaper and easier for them to participate in the Bitcoin market, said Bitwise CIO Matt Hougan. Decrypt. Like financial derivatives, options give investors the right to buy or sell an asset at a specified price within a specified time period.

“At any time, bitcoin is a long-term winner over conventional assets,” Hugan said in a statement. “I normally see this as another brick in the wall and we should be happy about that.”

Although Bitcoin futures were introduced on the Chicago Mercantile Exchange in 2017, options are different. With futures, the buyer of a contract is required to buy the underlying asset on a certain date, while options give the right – but not the obligation – to buy an asset.

“Being able to take an alternative view for institutional investors [Bitcoin] It's more capital efficient and easier exposure than a futures-based position,” said Bitwise Senior Investment Strategist Juan Leon. Decrypt In an interview.

The BlackRock Spot Bitcoin ETF, with an industry-leading market cap of $26 billion, got the same treatment as Friday's group of ETFs late last month. Listed on Nasdaq, SEC Approved options After product listing and business delaying the decision In March.

Options generally lead to an increase in trading activity, which in turn leads to better price discovery alongside more liquidity, Leon said. At the same time, options contracts can cause significant volatility in the price of Bitcoin on expiration days.

“Options are basically places to use,” Leon said. When there is a large concentration of positions at a particular price and maturity and the expiration date is passed, that can lead to increased liquidity.

For some experts, the SEC's approval of options extends beyond market volatility. A more efficient Bitcoin market may benefit investors, but it's “a sign of an interesting regulatory process,” said Krista Lynch, vice president of ETFs at Grayscale. Decrypt In the statement.

However, Lynch said the SEC approvalIt does not mean that options will start trading immediately,” said the regulatory process. Other measures will continue. Next, she said, Options Clearing Corporation will engage with the Commodity Futures Trading Commission (CFTC) for further approval.

The move was recently mentioned by Bitcoin firm NYDIG, which was reported by A Research note In the year How the 2010 Crash Derailed Platinum and Palladium ETF Options Still, the company concluded that the Bitcoin market will be viewed differently by the CFTC.

“We expect to see options trading on IBIT and possibly other Bitcoin ETFs by the end of the year.”

Edited by Andrew Hayward.