SEC Greenlights Bitcoin Options ETFs on NYSE and CBOE

On October 18, the U.S. Securities and Exchange Commission (SEC) gave the green light for the New York Stock Exchange (NYSE) and Chicago Board Options Exchange (CBOE) to list long-awaited options for spot Bitcoin exchange-traded funds (ETFs).

This approval paves the way for 11 ETF providers on the NYSE to offer options trading, including well-known names like Fidelity Wise Origin Bitcoin Fund, ARK21Shares Bitcoin ETF, Invesco Galaxy Bitcoin ETF, Franklin Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree’s Bitcoin Fund, Grayscale’s Bitcoin Trust and Mini Trust, Bitwise Bitcoin ETF, BlackRock’s iShares Bitcoin Trust ETF, and the Valkyrie Bitcoin Fund.

In August 2024, CBOE submitted a request to include options for spot Bitcoin ETF providers, marking a significant change in regulatory policy. With this shift, Bitcoin ETF options now fall into the same category as other commodity-backed ETFs that the SEC has approved for listing on the CBOE, with the exception of Grayscale’s Bitcoin Mini Trust.

Effects on markets through increased liquidity and potential short squeezes

The introduction of Bitcoin ETF options is expected to boost liquidity in the Bitcoin markets, potentially driving up prices as a result.

Jeff Park, an executive at Bitwise, noted that this approval brings a major upgrade from platforms like LedgerX and Deribit, which do not have central guarantors. Park also suggested that these options could lead to situations where overleveraged short traders may face “short squeezes,” forcing them to buy Bitcoin to cover their positions. He commented:

“Claiming that you can’t short squeeze a trillion-dollar asset is like saying you can’t make an elephant move. While it’s massive, if enough pressure is applied, even the largest creature can be forced to shift.”

Tom Dunleavy, managing partner at investment firm MV Global, added that the arrival of options for Bitcoin ETFs could serve as a tool to reduce the extreme volatility Bitcoin is known for, potentially leading to more stable market conditions over time.

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