Get Ready: Bitcoin ETF Options are Coming to US Exchanges Soon
Buckle up, crypto enthusiasts! Bitcoin ETF options are finally gearing up to hit the trading floors of U.S. exchanges before 2025. After months of regulatory silence, the buzz around options for spot Bitcoin ETFs is heating up, and it looks like this year could be the big moment. Ethereum ETF options are also on the horizon, promising a wave of excitement in the crypto space.
So, what exactly are options? In trading lingo, options are contracts that give you the right—whether to buy (“call”) or sell (“put”)—an asset at a predetermined price. They’re a popular tool for hedging (imagine locking in the right to sell BTC at a jaw-dropping $73,000!) and for speculating on price movements. While options might seem like a follow-up to the much-anticipated launch of BTC ETFs in January, they’re actually a game-changer for institutional players, especially in the volatile world of crypto.
The SEC’s Shifting Stance on Bitcoin ETF Options
Earlier this year, the major U.S. equities exchanges—NYSE Arca, Cboe, and Nasdaq—asked the SEC for the green light to list options on spot BTC ETFs. Initially, the SEC was tight-lipped, and outside opinions weren’t very encouraging. In May, Better Markets Inc., a private industry watchdog, urged the SEC to tread carefully, citing concerns about retail investors and potential market chaos reminiscent of the GameStop frenzy in 2021.
The SEC took these concerns to heart, requesting additional time to deliberate on the matter. After a series of delays, including requests in March, April, and July, things are finally starting to move. On August 8, Cboe filed an updated application with the SEC, addressing issues like market manipulation and position limits with greater detail.
James Seyffart, an analyst at Bloomberg Intelligence, noted in a recent X post that there’s “definitely some movement on Bitcoin ETF options.” Bloomberg predicts that spot BTC options could go live in the fourth quarter of this year, potentially before November, given the SEC’s election-year pressures. Ethereum ETF options are also in the pipeline, with Nasdaq having recently sought approval to list options on BlackRock’s iShares Ethereum Trust (ETHA).
The Market for Bitcoin Futures vs. Spot ETFs
In the meantime, U.S. investors have been trading options on Bitcoin futures ETFs, which track BTC’s price performance via futures contracts. However, these futures ETFs generally lag behind spot market equivalents due to the costs associated with rolling over monthly futures contracts. For example, the ProShares Bitcoin Strategy ETF (BITO) underperformed the spot market by about 2.6% from January to May, according to K33 Research.
Despite this, the market for options on BTC futures ETFs is booming. As of August 9, the open interest in BTC futures ETF options—reflecting the total value of all active contracts—stood at over $3.25 billion. In comparison, the combined net asset value of all BTC futures ETFs is approximately $4.3 billion. This shows that the options market is nearly as large as the futures ETFs themselves.
Spot BTC ETFs, on the other hand, command an even larger asset base, exceeding $58 billion as of August 9. If the enthusiasm for options on BTC futures ETFs is any indication, a new market for spot BTC options—potentially worth around $45 billion—could be on the brink of emerging.
A Milestone in Crypto Adoption
The advent of Bitcoin ETF options represents more than just a financial innovation; it’s a significant step toward broader crypto adoption. Options are crucial for institutional investors, who use them to hedge against market volatility and enhance their investment strategies. Financial advisors, who manage a substantial portion of the $9 trillion ETF market, rely on options to protect client portfolios from sharp market swings. A 2023 survey by The Journal of Financial Planning revealed that over 10% of advisors actively use options for this purpose.
With major financial firms like Morgan Stanley already positioning spot BTC ETFs for their advisors, the introduction of options will further boost their appeal to institutional investors. As we approach the anticipated launch, keep an eye on how these developments will shape the future of crypto trading and investment.
