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The United States Securities and Exchange Commission has postponed its decision on whether to approve option products in spot Bitcoin exchange-traded funds. This step could open the door for more institutional capital to flow into Bitcoin. On March 6, the SEC extended the deadline to respond to proposals from the Cboe Exchange and the Miami International Securities Exchange to offer options in Bitcoin ETF funds.
Noteworthy Development from the SEC
The SEC also delayed its decision on a proposal to offer options for the iShares Bitcoin Trust (IBIT) traded on the Nasdaq, which is managed by BlackRock. This delay ensures that the agency has sufficient time to review the request. All exchanges applied on January 25 to list Bitcoin ETF options, and the SEC, which initially had 45 days to make a decision or delay, faced the first decision deadline on March 10.
The SEC has until April 24 to reach a final decision, which gives the agency an additional 45 days. By law, there is a maximum decision period of 90 days. Options are derivative products that provide leverage to investors and allow them to make directional trades in the market.
If an investor believes that the price of Bitcoin will rise, they can buy a call option by paying a premium and agree to buy 1 Bitcoin at today’s price one month later with less money than it would take to buy 1 Bitcoin outright. If Bitcoin rises within the month, the investor can exercise the option, purchase Bitcoin at a lower price, and potentially sell it for a profit. If Bitcoin falls, they will likely let the contract expire and lose the premium paid.
The SEC and ETF Process
Grayscale CEO Michael Sonnenshein called last month for the approval of options for Bitcoin ETF funds, claiming they contribute to a robust and healthy market. The SEC approved spot Bitcoin ETF funds to start trading on January 11. This came after months of delays, on the last day a decision on approval was due.
Investors continue to invest in ETF funds. As of March 6, according to BitMEX Research, excluding Grayscale’s converted ETF, there were assets under management worth $25.87 billion in nine new ETF funds. The SEC is now faced with making a decision on seven spot Ethereum ETF funds. Analysts predict the agency may wait until May 23 to approve all of them, which is the deadline for VanEck’s application.
