The Need for Bitcoin Options: Grayscale CEO Advocates for Development of Listed Options Market

Grayscale CEO Urges Approval of Public Options for Bitcoin Spot ETFs Following Successful Conversion of Company's Bitcoin Fund

Grayscale CEO calls for public options market for Bitcoin spot ETFs.

Andrew Throuvalas | Last updated: February 5, 2024 05:06 EST | 2 min read

[Image by Jimmy Aki, Midjourney.]

Grayscale CEO Michael Sonnhenshein is calling for the approval of public options on Bitcoin spot ETFs after his company’s Bitcoin fund successfully converted into one last month. 🚀

“It’s never been more important for the crypto and ETF communities alike to advocate for the development of a robust listed options market for spot bitcoin ETFs,” wrote Sonnhenshein in a post to X on Monday. 💪

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The Need for Bitcoin Options

Options are financial derivatives affording investors the right to buy or sell an underlying asset at a predetermined rate at a later time. Holders aren’t required to exercise this right, making options a popular way to trade without exposing themselves to an asset itself. 📈💰

The U.S. Securities and Exchange Commission (SEC) approved Bitcoin spot ETFs to trade on national securities exchanges on January 11. Since then, many of those same exchanges, including the NYSE and others, have filed 19b-4 Forms to permit listed options on commodity-based ETFs, including Bitcoin spot ETFs. 🗽

So far, options have only been made available for Bitcoin futures ETFs. They launched just one day after the ProShares Bitcoin Strategy ETF (BITO) began trading in October 2021. 📅

“Like bitcoin futures ETFs, these kinds of products are able to rely on rules that allow them to go automatically effective,” Sonnhenshein explained.

On the other hand, options for Bitcoin spot ETFs must go through a lengthy review period, much like the spot ETFs themselves. 🕒

The CEO argued that options will support Bitcoin’s price discovery and help investors navigate crypto’s unique market conditions in creative ways. 💡

“The same way bitcoin futures ETFs and spot bitcoin ETFs should (and now are) treated the same, so too should listed options on these products,” he wrote.

Grayscale’s Influence on Bitcoin Spot ETFs

Bitcoin spot ETFs were approved over two years after their futures counterparts. Previously, the SEC favored futures-based ETFs for hypothetically being more resistant to market manipulation than the Bitcoin spot market. 😯

The SEC was forced to abandon this position after a decisive court loss to Grayscale last year. At the time, three judges ruled that the agency’s differential treatment of such similar products was “arbitrary and capricious.” ⚖️

SEC chair Gary Gensler has made it clear that while the agency now approves both products, it still does not endorse Bitcoin.

“Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing,” Gensler wrote in his approval statement last month. ❌💸

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🤔 Q&A: What Readers Want to Know about Bitcoin Options and ETFs

1. What are the benefits of Bitcoin options for investors?

Bitcoin options allow investors to trade on the price movement of Bitcoin without actually owning the asset. This provides flexibility and risk management, as investors can profit from both rising and falling prices.

2. Is there a specific timeframe for the approval of listed options on Bitcoin spot ETFs?

The approval process for listed options on Bitcoin spot ETFs can vary. It typically involves a review period by regulatory bodies such as the SEC. The timeframe for approval depends on various factors, including regulatory considerations and market demand.

3. How do Bitcoin futures ETFs differ from Bitcoin spot ETFs?

Bitcoin futures ETFs allow investors to gain exposure to Bitcoin through futures contracts, which are agreements to buy or sell an asset at a predetermined price and date in the future. Bitcoin spot ETFs, on the other hand, track the price of Bitcoin directly.

4. What impact could the development of a listed options market have on Bitcoin’s price discovery?

The availability of options on Bitcoin spot ETFs could enhance Bitcoin’s price discovery process. Options provide additional liquidity and allow for more sophisticated trading strategies, which can contribute to a more efficient and accurate determination of Bitcoin’s market value.

5. What is Grayscale’s role in the approval of Bitcoin spot ETFs?

Grayscale’s successful conversion of its Bitcoin fund into a spot ETF has demonstrated the viability and demand for such products. Grayscale’s advocacy for the development of a listed options market further highlights their commitment to advancing the Bitcoin ETF ecosystem.

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In conclusion, the development of a listed options market for Bitcoin spot ETFs is a crucial step in expanding the investment opportunities and capabilities within the crypto space. The approval of options would provide investors with more flexibility and risk management tools, ultimately contributing to the overall maturation and growth of the market. As regulatory bodies continue to navigate the complexities of the crypto landscape, it is important for industry leaders and communities to advocate for the further development and adoption of innovative financial instruments.

🌐📊 References: 1. Bitcoin not taking off as mainstream payment 2. Record $11B Crypto Options Expiry Looms, BTC Shows Little Volatility 3. Robinhood to quickly list newly approved spot Bitcoin ETFs with SEC’s embrace 4. Grayscale’s GBTC discount closes to zero for the first time since February 2021 5. Fake Bitcoin ETF approval tweet gives sneak peek into ETH price spike with Ethereum ETF approval

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💬 Have any questions or thoughts about Bitcoin options and ETFs? Drop your comments below and let’s start a discussion! 🚀✨

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