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SEC Delays Decision on Options Trading on Spot Bitcoin ETFs

The approval decision for options trading on spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) has been postponed.

The SEC has granted an extension to the response deadline for both the Cboe Exchange and the Miami International Securities Exchange, which submitted proposals to offer options on Bitcoin ETFs.

Furthermore, the agency has deferred the decision regarding Nasdaq’s proposal to provide options on BlackRock’s iShares Bitcoin Trust (IBIT), stating the necessity for additional time to thoroughly evaluate the request.

SEC Invokes Right to Defer the Decision

The filing deadline for Bitcoin ETF options was January 25, and the SEC’s initial decision deadline was March 10.

Nevertheless, the SEC has exercised its authority to delay the decision, invoking an additional 45 days under U.S. securities laws.

Consequently, the SEC now has until April 24 to make a final determination regarding options trading for Bitcoin ETFs.

Options, as derivative products, afford traders leverage, enabling them to speculate on market direction.

As an illustration, suppose a trader anticipates a rise in Bitcoin’s price. They can opt to purchase a “call option,” allowing them to acquire 1 BTC at today’s price in a month’s time, while committing a smaller sum of money compared to outright buying 1 BTC.

Should Bitcoin’s price surge during that period, the trader can exercise their option, procuring Bitcoin at a lower rate and potentially selling it for profit.

However, if Bitcoin’s price declines, the trader may decide to allow the option contract to expire, thereby relinquishing the premium they paid.

Grayscale CEO Michael Sonnenshein has advocated for the approval of Bitcoin ETF options, asserting that they contribute to fostering a resilient and thriving market.

Bitcoin ETF Options Will Attract Hedge Funds

Analysts, including Dave Nadig from VettaFi, anticipate that the introduction of Bitcoin ETF options will attract hedge fund participants who have not previously engaged with the crypto ecosystem, offering them an avenue to enter the market.

The SEC’s recent greenlight of ten spot Bitcoin ETFs on January 11 has already led to substantial influxes of funds. As of March 6, excluding Grayscale’s transformed ETF, the nine newly approved ETFs had amassed $25.87 billion in assets under management, as per data from BitMEX Research.

In addition to options trading, the SEC is currently assessing seven spot Ether ETFs. Analysts speculate that the agency might hold off until May 23 to approve them all, coinciding with the deadline for VanEck’s application.

The SEC is also reviewing multiple leveraged Bitcoin ETFs, including submissions from asset manager Direxion for five inverse and long spot Bitcoin ETFs, ProShares’ five leveraged Bitcoin funds, and REX Shares’ six leveraged ETFs.

In a more recent development, SEC Commissioner Hester Peirce expressed that the regulatory agency is predominantly employing an “enforcement-only mode” concerning cryptocurrency regulation. She highlighted that a significant obstacle within the cryptocurrency industry is the SEC’s tendency to rely on enforcement actions rather than establishing clear regulatory frameworks in advance.

Peirce emphasized, “If you truly aim to distinguish between bad and good behavior, having transparent rules for those willing to comply is a much preferable approach than retroactively enforcing regulations.”

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

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