SEC Set to Approve Bitcoin Options ETF in 2024
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After the U.S. Securities and Exchange Commission’s historic approval of spot Bitcoin ETFs, a new obstacle arises as the regulatory process delays the approval of options on Bitcoin ETFs, potentially impacting their attractiveness.
Regulatory complexities are the cause behind the delay in approving options on spot Bitcoin ETFs. Unlike traditional ETFs, which see technical rule changes for options approved shortly after trading begins, the decentralized nature of Bitcoin has led the Commodity Futures Trading Commission (CFTC) to take extra time to carefully consider the matter before giving its approval.
Martin Leinweber, Digital Asset Product Strategist at MarketVector Indexes, the benchmark provider for spot Bitcoin ETFs in VanEck, acknowledges that this dual regulatory engagement adds a layer of complexity and potential regulatory challenges.
The delay in options approval is a concern for the industry and could have an impact. Leinweber expects the approval process to take anywhere from two to ten months. This delay not only hinders the crypto industry’s goal of introducing innovative products but also poses risk management challenges for significant investors.
Without options, institutional investors may struggle to effectively manage risks, potentially leading some investors to avoid ETFs altogether, as predicted by Yesha Yadav, a law professor at Vanderbilt University. This obstacle could impede the industry’s ambition to attract substantial investments, estimated to reach as high as $100 billion.
While it is not uncommon for options to require dual approval, it remains a rare occurrence. The SPDR Gold Shares ETF, which is tied to a physical commodity, experienced a similar delay of over three years in obtaining CFTC approval for options. Exchanges such as Nasdaq, CBOE, and NYSE Arca, which list the ETFs, have sought SEC approval for options, with CBOE expecting to list them later in 2024.
In a parallel development, Arthur Hayes, the founder of BitMEX, explores the potential impact of traditional finance challenges on the value of Bitcoin. Analyzing the financial setback of New York Community Bancorp (NYCB) and broader concerns within the banking sector, Hayes predicts that Federal Reserve leaders will respond by printing more money.
Hayes points out that if his forecast is correct, the market will force a few banks into bankruptcy within that period, leading the Fed to cut rates and announce the resumption of the BTFP (Bank Term Funding Programme). He anticipates a renewed bank bailout, which could inject liquidity into cryptocurrencies, particularly Bitcoin.
While Hayes acknowledges that there may be a temporary decrease in the value of Bitcoin due to banking concerns, he believes that asset dumping by banks like NYCB could trigger a new bailout. He notes that Bitcoin’s performance during the banking crisis in March 2023 was similar, with a brief drop followed by a significant bull run.
During the March crisis, Bitcoin’s value rose by more than 40% due to its perceived role as a safe-haven asset or digital gold in times of financial instability.
Tags: Bitcoin ETF