The United States Securities and Exchange Commission (SEC) has made the decision to postpone its ruling on whether to approve options trading on Bitcoin exchange-traded funds (ETFs). This delay has the potential to attract more institutional capital into the world of Bitcoin.
The SEC extended its response time in a filing on March 6, giving itself more time to consider the bids from Cboe Exchange and the Miami International Securities Exchange to offer options on Bitcoin ETFs. It also delayed its decision on Nasdaq’s bid to offer options on BlackRock’s iShares Bitcoin Trust (IBIT), stating the need for “sufficient time” to review the request.
All three exchanges submitted their filings for Bitcoin ETF options on January 25, and the SEC’s initial deadline for a decision was March 10. According to U.S. securities laws, the SEC has 45 days to make a decision or defer it. By deferring, the agency now has an additional 45 days, which is the maximum allowed by law, to reach a final decision. The new deadline for a decision is April 24.
Options are derivative products that provide traders with leverage and the ability to make directional bets on the market. Traders can purchase a “call option” if they believe Bitcoin’s price will rise. This allows them to buy 1 BTC at today’s price in a month’s time, while putting down less money than what would be needed to buy 1 BTC outright. If Bitcoin’s price increases, the trader can exercise their option, buy Bitcoin at the lower price, and potentially sell it for a profit. If the price falls, they would likely let the contract expire and lose the premium paid.
Grayscale CEO Michael Sonnenshein has been advocating for the approval of options for Bitcoin ETFs, arguing that they contribute to a robust and healthy market. Analyst Dave Nadig has also expressed his belief that the introduction of Bitcoin ETF options will attract hedge fund players who were previously not involved in the cryptocurrency ecosystem.
In January, the SEC approved 10 spot Bitcoin ETFs to start trading, after months of delays. These ETFs have received significant investments, with $25.87 billion in assets under management, according to data from BitMEX Research.
The SEC is currently considering seven spot Ether (ETH) ETFs, and analysts speculate that the agency is waiting until the deadline for VanEck’s application on May 23 to approve all of them.
In addition to ETFs, the SEC is also reviewing multiple leveraged Bitcoin ETFs. Asset manager Direxion filed for five inverse and long spot Bitcoin ETFs in January, while ProShares filed for five leveraged Bitcoin funds, and REX Shares filed for six leveraged ETFs.
Overall, the SEC’s decision to postpone the approval of options trading on Bitcoin ETFs has significant implications for the cryptocurrency market. It opens the door for increased institutional capital and could attract more hedge fund players into the space.