Bitcoin ETF Options Launch on US Exchanges Enhances Market Liquidity
A new crypto-related financial tool has launched.
Spot bitcoin ETFs became available on US exchanges in January, and now investors can trade options on these products. An option is a contract that grants the right to buy or sell a financial product at a specific price within a designated time frame.
Industry experts believe that options will create a more robust ecosystem around spot ETFs, improving liquidity and price discovery. CK Zheng, CIO of ZX Squared Capital, stated that bitcoin ETF options are “extremely powerful” for institutional investors managing their bitcoin exposures under varying market conditions. Anchorage Digital CEO Nathan McCauley noted that this product solidifies bitcoin's status as a mainstream institutional investment alongside stocks, bonds, and commodities.
Options can also serve speculators, allowing them to leverage their positions when bullish or bearish on the asset. Jeff Park from Bitwise remarked that these options represent “the first time the financial world will see regulated leverage on a perpetual commodity that is truly supply-constrained.” Joe Consorti emphasized that listing options on bitcoin ETFs “opens the door to the largest and deepest liquidity pools on the planet.”
Key events leading to these listings include:
- In January, Nasdaq, NYSE, and Cboe submitted proposals to the SEC to list options on spot bitcoin ETPs.
- Grayscale Investments highlighted the SEC’s swift approval of options on bitcoin futures ETFs in March, urging similar action for spot products. However, the SEC later indicated it needed more time to consider the proposals.
- The SEC granted “accelerated” approval for options on BlackRock’s iShares Bitcoin Trust (IBIT) on September 20. Subsequently, NYSE and CBOE received approval to list options on other bitcoin ETFs.
- The CFTC acknowledged the SEC and the Options Clearing Corporation (OCC), stating that listing these bitcoin ETF options does not fall under its jurisdiction.
- The OCC announced preparations for the clearance, settlement, and risk management of bitcoin ETF options, with Nasdaq confirming plans to list IBIT options shortly after.
Currently, options on IBIT are available; this fund has approximately $43 billion in assets under management, making it the largest bitcoin ETF, surpassing even the iShares Gold Trust (IAU).
Grayscale announced that bitcoin ETF options will begin trading on NYSE, where its GBTC and BTC products are listed. Bitwise expects similar activity for options on its bitcoin ETF.
Zheng noted that many new investors will likely apply their experiences from the meme stock options market to bitcoin options. The bitcoin ETF options market is expected to compete with Deribit, attracting more investors to the US and establishing it as a center for bitcoin derivative trading.
Park highlighted that BTC ETF options will provide “cross-margining capabilities in multi-asset portfolios,” offering advantages that platforms like Deribit cannot match. He added that only spot ETF options can leverage various assets for enhanced capital efficiency, akin to free leverage.