Option Trading Move for Spot Bitcoin ETFs: Will SEC Approve?

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• There are growing speculations in the market about the potential inclusion of option trading for commodity-based trust fund shares associated with specific new Bitcoin ETFs.
• Henry Jim reported that the New York Stock Exchange (NYSE) has filed a 19b-4 application to list and trade options on Commodity-Based Trust Shares.
• The approval process could include various possibilities, ranging from faster approval to waiting until the end of September or the beginning of October 2024.

Following the successful launch of Spot Bitcoin ETFs, new steps are being taken to expand the ETF ecosystem!

Option Trading for Spot Bitcoin ETFs

The introduction of Spot Bitcoin ETFs experienced a strong increase, surpassing $10 billion in the first three days of their launch. Meanwhile, there are growing speculations in the market about the potential inclusion of option trading for commodity-based trust fund shares associated with specific new Bitcoin ETFs.

Last Saturday, on January 13th, Bloomberg analyst Henry Jim reported that the New York Stock Exchange (NYSE) has filed a 19b-4 application to list and trade options on Commodity-Based Trust Shares. This move is somehow in line with the structural framework of some newly introduced Bitcoin ETFs. If approved, this initiative will not only increase trading volume and revenue for NYSE but will also provide liquidity to newly introduced Bitcoin ETFs.

Bloomberg’s Senior ETF Strategist Eric Balchunas further explains that the 19b-4 application is a critical step that enables the listing of options on spot BTC ETFs. This process involves three exchanges filing under 19b-4, and the earliest approval is expected to be approximately within two months. Balchunas also emphasizes the importance of such applications, noting that commodity funds like GLD have gone through a similar process. He suggests that options could become a significant aspect of these ETFs as interest increases due to their inherent volatility.

Bloomberg strategist James Seyffart shares insights into the possible impacts of the 19b-4 application. Theoretically, the SEC could expedite the approval process with an initial deadline within the first 60 days, but Seyffart speculates about potential delays considering the SEC’s historical approach to deadlines.

The approval process could include various possibilities, ranging from faster approval to waiting until the end of September or the beginning of October 2024. This news comes against the backdrop of increasing interest in the intersection of traditional financial markets and the crypto ecosystem. In addition to option trading for spot ETFs, ProShares has also filed new applications for leveraged Bitcoin ETFs. ProShares ETFs will provide investors with the opportunity to take positions against or in favor of Bitcoin’s price movements.

Grayscale Boosts Trading Volume for BTC ETFs

Asset management giant Grayscale has recently become a significant player driving the trading volume of Bitcoin ETFs. In an update for Tuesday, January 16th, provided by James Seyffart, he mentioned that Bitcoin ETFs experienced net outflows, expecting about $594 million to be withdrawn, particularly from $GBTC, and estimating a total outflow of $1.173 billion.

While some other Bitcoin ETFs experienced inflows, Seyffart expresses doubts about whether these inflows will be sufficient to offset the substantial outflow of nearly $600 million from $GBTC. The dynamics of fund flows in the Bitcoin ETF market continue to be a focal point for market observers.