Grayscale CEO Eyes Options for Spot Bitcoin ETF, Urges SEC Approval

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In a bold move, Grayscale’s CEO, Michael Sonnenshein, is spearheading the push for regulators to greenlight options linked to spot Bitcoin exchange-traded funds (ETFs). Sonnenshein, in a recent insightful post, emphasizes the potential advantages for investors, citing these options as valuable tools to comprehend market dynamics, unearth fair prices, and navigate complexities for more effective investment strategies.

As we look ahead, I think 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. Although $GBTC has been in the public market since 2015, it was never accompanied by listed…

— Sonnenshein (@Sonnenshein) February 5, 2024

Curious about why the bulls are rallying for options after ETFs? Let’s dive into the intricacies.

The Case for Options Post ETFs

However, Options, as elucidated by Sonnenshein, are financial contracts granting investors the right, without the obligation, to buy or sell a specified amount of an asset at a predetermined price within a specified timeframe. Integral to financial markets, options empower investors to manage risk, hedge positions, and potentially generate income.

In contrast, options on spot bitcoin ETFs cannot benefit from automatic effectiveness, and must instead go through a potentially lengthy review akin to the 19b-4 process for spot bitcoin ETFs themselves.https://t.co/9GlelNhpqD

— Sonnenshein (@Sonnenshein) February 5, 2024

Breaking Ground in Traditional Markets

Option trading is well-established in traditional financial markets, overseen by the CFTC and SEC. Surprisingly, this avenue is not readily available for spot Bitcoin ETFs. Sonnenshein contends that closing this gap is crucial for market fairness.

He underscores that while futures-based ETFs quickly embraced options post-SEC approval, commodity-based ETFs, like spot Bitcoin ETFs, did not. This regulatory incongruity underscores the urgency for clear standards and equal opportunities for diverse ETFs.

SEC Springs Into Action

To enable options trading on commodity-based ETFs, including spot Bitcoin ETFs, national exchanges are actively pursuing regulatory amendments. Submission of Forms 19b-4 is a key facet of these initiatives aimed at expanding investment options and fostering Bitcoin innovation.

The SEC has already acknowledged the 19b-4's requesting the ability to trade options on spot #Bitcoin ETFs. This is faster than SEC typically moves. Options could be approved before end of February if SEC wants to move fast?…

AT ABSOLUTE EARLIEST options still ~27+ days away pic.twitter.com/ohbvHgP2uO

— James Seyffart (@JSeyff) January 19, 2024

As the SEC deliberates proposals for options on spot Bitcoin ETFs, including BlackRock’s proposal with Cboe, Sonnenshein maintains an optimistic outlook. He envisions that options will not only enhance market liquidity but also democratize and demystify Bitcoin investments for newcomers. Bloomberg’s Eric Balchunas speculates the SEC’s decision might be revealed by Feb. 15 or, at the latest, by September 2024.

GBTC Dominates as Competition Heats Up

Meanwhile, GBTC commands the spot Bitcoin ETF market with an impressive trading volume of $338 million, led by Sonnenshein. BlackRock closely trails behind, intensifying the competition in this fiercely competitive trillion-dollar industry.

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As the industry speculates on the future of options following the setbacks of ETFs, one can’t help but wonder—will options breathe new life into the momentum that seemed lost? Only time will tell, but the push for options on spot Bitcoin ETFs undoubtedly is something to watch for.

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