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NYSE’s Bitcoin Opportunity: Options on Bitcoin ETFs May Fuel Future Growth

Last Updated January 17, 2024 9:53 AM
Teuta Franjkovic
Last Updated January 17, 2024 9:53 AM

Key Takeaways

  • The introduction of spot Bitcoin ETFs led to a surge in trading, with skyrocketing volumes in just three days.
  • The NYSE has filed an application to allow options trading on spot Bitcoin ETFs.
  • ProShares has filed applications for leveraged Bitcoin ETFs.
  • Grayscale has been withdrawing funds from its Bitcoin Trust, leading to outflows from Bitcoin ETFs overall.

The introduction of spot Bitcoin ETFs has seen a remarkable increase in trading activity, with volumes soaring to $10 billion within a mere three days of their launch.

At the same time, there’s significant market speculation about the potential for allowing options trading on the shares of commodity-based trusts, specifically for some of the newly released Bitcoin ETFs.

Options Trading for Spot Bitcoin ETFs: A Potential Game-Changer

On January 13, Bloomberg analyst Henry Jim reported  a significant development from the New York Stock Exchange (NYSE). The NYSE submitted a 19b-4 filing , a formal request for regulatory approval to list and trade options on Commodity-Based Trust Shares. This move is, notably, tailored to the structure of some of the newly launched Bitcoin ETFs.

Eric Balchunas, a senior ETF strategist at Bloomberg, elaborated  on the importance of the 19b-4 filing. This filing is a step towards enabling the trading of options on spot Bitcoin ETFs. The process involves submissions from all three exchanges under the 19b-4 framework, with the possibility of receiving approval in about two months.

Balchunas also highlighted  the historical precedence of similar filings in the commodity trusts sector. He referenced the $GLD ETF as a notable example. He underscored the potential impact of such approvals, particularly given Bitcoin’s inherent volatility. According to Balchunas, the introduction of options trading could amplify the appeal and functionality of these Bitcoin ETFs.

If sanctioned, this initiative would not only increase trading volumes and generate additional revenue for the exchange but also enhance the liquidity of the new Bitcoin ETFs.

SEC Approval of NYSE Bitcoin ETF Options Looms

Bloomberg strategist James Seyffart offers insight  into the potential outcomes of the 19b-4 application.

Although the United States Securities and Exchange Commission (SEC) could speed the process up, Seyffart remains cautious. He speculates that there might be delays, drawing on the SEC’s historical pattern of handling such applications.

Seyffart suggests  that the timeline for approval could vary significantly. The scenarios range from an unexpectedly swift approval process to a more extended timeline, possibly stretching into late September or early October. This development is unfolding amid a rising interest in bridging traditional financial markets with the cryptocurrency sector.

In a parallel move, ProShares has recently submitted applications for leveraged Bitcoin ETFs.  These ETFs are designed to provide investors with the option to speculate on Bitcoin’s price movements. This allows them to position themselves either in support of or against Bitcoin’s market fluctuations.

Grayscale’s Influence on Bitcoin ETF Market Dynamics

Grayscale, a leading asset management firm, has recently been at the forefront of driving trading volumes in the Bitcoin ETF market. In a latest update from James Seyffart, he noted  that there were net outflows from Bitcoin ETFs on the previous day. He specifically pointed out  that an estimated $594 million is expected to be withdrawn from Grayscale’s Bitcoin Trust ($GBTC), culminating in a total outflow of $1.173 billion.

Despite some Bitcoin ETFs registering inflows, Seyffart remains doubtful about their capacity to fully counterbalance the significant outflow from $GBTC, which nears $600 million.

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