Spot Bitcoin ETF Options Could Launch in Q4

The U.S. Securities and Exchange Commission (SEC) could greenlight options for several spot Bitcoin exchange-traded funds (ETFs), which were approved to trade in the US earlier this year, suggested Bloomberg ETF analyst James Seyffart.

We think the #Bitcoin ETF options happen in 4th quarter this year. Final deadline for SEC decision is ~Sept. 21 but there’s more steps needed after that from OCC & CFTC.

Here are some BTC & ETH related ETFs including leveraged that already have options. cc @EricBalchunas https://t.co/xErD5oPiWb pic.twitter.com/USauv6QaFs

— James Seyffart (@JSeyff) August 8, 2024

Apart from the SEC’s approval, these products will need additional steps from the OCC and CFTC to fully launch.

The SEC has until late September to make a final decision on Bitcoin ETF options, but even if the SEC approves the ETFs, the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC) need to complete their respective processes before options can go live, according to the analyst.

More ETF Products All The Time

There are already 20 futures Bitcoin and Ethereum ETFs featuring options in the US, but those are not spot crypto ETFs.

Shortly after Seyffart’s post, MIAX, MIAX Pearl and BOX Exchange withdrew their proposals to list and trade options on Bitcoin funds. However, according to ETF expert Eric Balchunas, major exchanges like the NYSE, Nasdaq, and CBOE “still have active applications,” which strengthens the odds of approval “later this year.”

There’s a possibility that the entire process could be expedited, leading to a launch earlier than Q4, Seyffart noted, but based on past experiences, it’s more likely to take the full estimated time.

“Technically in our note I said second half of 2024 because the SEC deadline is in 3rd quarter (sept 21) and there’s nothing stopping things from moving even faster than that other than: It normally takes longer than that,” Seyffart wrote.

Similar to options on stocks, options on spot Bitcoin ETFs allow investors to speculate on the price movement of the ETF without having to buy or sell the ETF itself.

Some experts say institutional investors are keenly interested in options on spot bitcoin ETFs as a crucial tool for managing risk. The availability of these options would enhance market liquidity, facilitate more accurate price discovery, and ultimately accelerate the broader adoption of Bitcoin.

Grayscale Investments, a prominent crypto asset manager, is pushing for approval from the SEC to introduce options on its Grayscale Bitcoin Trust (GBTC), one of the leading Bitcoin ETF in terms of assets under management.

The SEC has delayed approving options for spot Bitcoin ETFs, despite allowing the trading of the ETFs themselves in January. The approval process is complex due to the involvement of both the SEC and the CFTC.

Industry experts are puzzled by the SEC’s delay, especially given that the SEC has already accepted options for Bitcoin futures ETFs.

Spot Ethereum ETFs Growing

Earlier this week, BlackRock and Nasdaq submitted a notice of proposal seeking to offer options for BlackRock’s spot Ethereum ETF, the iShares Ethereum Trust (ETHA). The move came less than a month after nine spot Ethereum ETFs debuted trading in the US.

Nasdaq said offering options on the spot Ethereum ETF would benefit investors by providing a relatively low-cost investment tool to gain exposure to Ether (ETH).

While exchanges are still waiting on permission from regulators to list options on spot Bitcoin ETFs, BlackRock and Nasdaq are making a push to add options to the spot Ethereum ETF.

Grayscale, Bitwise, and NYSE American have joined BlackRock in pursuing regulatory approval to list options on three spot Ethereum ETFs.

On Wednesday, NYSE American submitted a request to the SEC for this approval, specifically targeting the Grayscale Ethereum ETF (ETHE), Grayscale Ethereum Mini Trust (ETH), and Bitwise Ethereum ETF (ETHW).

NYSE believes options on Ethereum ETFs will provide investors with a more affordable way to gain exposure to Ethereum and a valuable tool for risk management.

The SEC has reportedly invited public comments on the NYSE proposal before making a decision. Like options for spot Bitcoin ETFs, those for Ethereum ETFs will also need approval from the CFTC and OCC due to Ethereum’s commodity status.

Bloomberg’s Seyffart suggested that the SEC could make a final decision on these proposals next year.