SEC Greenlights Bitcoin Options ETFs on NYSE and CBOE

On October 18, the United States Securities and Exchange Commission (SEC) granted approval for the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE) to list options for Bitcoin exchange-traded funds (ETFs). This move is anticipated to significantly enhance liquidity in the market.

The NYSE will offer options trading for the following 11 approved ETF providers:

• 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
• Grayscale Bitcoin Mini Trust
• Bitwise Bitcoin ETF
• BlackRock’s iShares Bitcoin Trust ETF
• Valkyrie Bitcoin Fund

Additionally, the CBOE submitted an application in August 2024 to list options for these Bitcoin ETF providers through a proposed rule adjustment. This regulatory shift aligns Bitcoin ETF options with other commodity-based ETFs, which have already received approval from the SEC for listing on the CBOE, with the exception of Grayscale’s Bitcoin Mini Trust.

Implications for Market Dynamics

The advent of options trading for Bitcoin ETFs is expected to bring crucial liquidity to the Bitcoin market, potentially acting as a catalyst for price increases. Market experts suggest that this new offering could lead to significant market movements.

According to Bitwise executive Jeff Park, this approval signifies a major improvement over platforms like LedgerX and Deribit, which lack central guarantors. He points to the capacity for options to induce situations where heavily leveraged short traders could be compelled to buy Bitcoin to mitigate their positions:

“Saying you can’t short squeeze a trillion-dollar asset is like saying you can’t make an elephant dance. Sure, it’s huge, but if you tie enough ropes to its legs and pull hard enough, even the biggest creature can be moved in ways it doesn’t want.”

Tom Dunleavy, managing partner at investment firm MV Global, noted that the introduction of options could also serve as a mechanism to reduce the volatility often associated with Bitcoin, leading to more stable market conditions over time.