The U.S. Securities and Exchange Commission (SEC) has extended its deliberation period regarding the potential introduction of options trading on spot Bitcoin Exchange-Traded Funds (ETFs) listed on the New York Stock Exchange (NYSE).
This delay, while impacting the proposed options for the Bitwise Bitcoin ETF (BITB) and the Grayscale Bitcoin Trust (GBTC), among others holding Bitcoin, also opens up new possibilities and potential benefits for the market.
In its filing dated April 8, 2024, the SEC stated, “The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change.” The new deadline for the regulator to approve, deny, or further postpone the proposed rule change is May 29, 2024.
This decision comes after the SEC reached a similar outcome last month regarding options trading on Nasdaq’s proposed BlackRock’s iShares Bitcoin Trust (IBIT).
Options are derivative financial instruments that give traders leverage and enable them to make directional bets on the market. For instance, if a trader expects Bitcoin’s price to rise, they can pay a premium, buy a “call option,” and agree to purchase 1 BTC at the current price in a month while putting down less money than would be needed to buy 1 BTC outright.
If Bitcoin’s value increases during that period, the trader could exercise their option, buy Bitcoin at the lower agreed-upon price, and potentially sell it for a profit. Conversely, if the price decreases, they would likely let the contract expire and forfeit the premium paid.
Push For Bitcoin ETF Options
Grayscale’s CEO, Michael Sonnenshein, a respected figure in the industry, is one of two individuals who has written to the SEC requesting the approval of the rule change to allow options trading on spot Bitcoin ETFs. In a Feb 28 letter, Sonnenshein presented a compelling argument, stating there is no reason to reject options trading on spot Bitcoin ETFs, as the SEC has already approved spot Bitcoin futures ETFs on the NYSE.
“The natural next step is approving options on spot Bitcoin ETPs,” Sonnenshein stated.
In a Feb 5 post on the social media platform X (formerly Twitter), he further emphasized that approving options for spot Bitcoin ETFs would “contribute to a robust and healthy market.”
While the SEC has postponed its decision, Grayscale remains optimistic about the eventual approval of options trading on its BTC Trust and other spot BTC ETFs listed on the NYSE. This approval, when it comes, is expected to bring significant positive changes to the market, further enhancing its robustness and health.
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