The Securities and Exchange Commission (SEC) has given Nasdaq approval to trade options on BlackRock’s Bitcoin Spot ETF. What does this mean for Bitcoin (BTC) and what’s next?
SEC Greenlights Options on BlackRock's Bitcoin ETF
On Friday, the Securities and Exchange Commission (SEC) gave the green light for BlackRock Bitcoin Spot ETF Options TradingThis follows a request from Nasdaq on January 9, which wanted to offer this financial vehicle on the IBIT.
After careful consideration, the Commission considers that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, the requirements of section 6 of the Act.
In short, options are a tool to buy or sell an asset at a specific price and date. For example, if a trader buys an option to buy BTC at $63,000 on September 30th and it reaches $65,000 by that expiration, the trader would make a profit by exercising the option.
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With such a product, Bitcoin therefore takes a step further into traditional finance and investors will thus be able to use options on IBIT to hedge against a variation in the asset.
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A conservative approach to limiting market manipulation
In total, there is a maximum number of outstanding options contracts that can be issued on a single product, namely 25,000, 50,000, 75,000, 200,000 or 250,000. In this case, Nasdaq asked SEC to approve most conservative scenarionamely the ceiling of 25,000 contracts.
According to figures provided by Nasdaq, such a limit is sufficient to protect the underlying, in this case the IBIT ETF, from market manipulation. And for good reason, with 25,000 option contracts, this would only represent 0.4% of the ETF's capitalization, all with a risk of less than 0.01% on the BTC capitalization.
This scenario therefore stands in contrast to certain leveraged products such as futures, which can increase volatility on an asset when cascading liquidations take place during strong movements.
According to Eric Balchunas, ETF analyst at Bloomberg, SEC also expected to approve options on other ETFs. However, we will have to wait a little longer before their listing. Indeed, the Office of the Comptroller of the Currency (OCC) as well as the Commodity Futures Trading Commission (CFTC) have yet to rule on the subject:
Important note: This is just one stage of approval, the OCC and CFTC has to approve as well before they officially list. The other two don't have a 'clock' so not sure when they'll be approved. A big step tho nevertheless that the SEC came around.
— Eric Balchunas (@EricBalchunas) September 20, 2024
👉 Also in the news — BlackRock reportedly preparing for US debt crisis by hedging with Bitcoin
Meanwhile, BTC is trading at $62,900, down slightly by 1.8% over the last 24 hours.
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Source: SEC
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Since 2021, I have devoted my free time to seriously training myself on cryptocurrencies in order to acquire as much knowledge and credibility as possible. I often have the opportunity to conduct interviews with influential figures in the blockchain industry. I also conduct in-depth analyses on Web3 themes to offer exclusive content to Cryptoast readers.
Vincent Maire
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