Debate Surrounding Bitcoin ETF Options Intensifies Among Analysts
As more U.S. spot Bitcoin [BTC] ETF options received approval from regulators, the financial market has been buzzing with commentary.
On October 18th, the U.S. Securities and Exchange Commission (SEC) greenlit the introduction of new products on both the NYSE (New York Stock Exchanges) and Cboe (Chicago Board Options Exchange).
NYSE American will now be offering options for Fidelity’s BTC fund, FBTC, and ARK 21Shares’ ARKB. Concurrently, Cboe will be facilitating trading of Grayscale’s GBTC, mini BTC, and Bitwise’s BTIB.
This development comes on the heels of the recent approval of BlackRock’s IBIT options.
What potential ramifications could these ETF options have on the BTC market and its price?
Differing Views on U.S. BTC ETF Options
Some analysts believe that this move could usher in increased volatility and enhanced liquidity within the Bitcoin market.
For reference, options provide professional traders with the ability to speculate and implement risk management strategies without owning the underlying BTC asset.
Following the approval of IBIT options last month, BTC investor Anthony Pompiliano suggested that it might lead to a decrease in BTC volatility and cap its upward potential.
“The authorization of options on Blackrock’s Bitcoin ETF is likely to drive more institutional adoption of the asset, subsequently reducing volatility and limiting Bitcoin’s explosive growth.”
On the contrary, Bitwise’s Jeff Park viewed the approval as a positive step that could bolster BTC volatility, liquidity, and price. He opposed what he considered a misguided stance on the U.S. BTC ETF options.
Park’s viewpoint was echoed by a majority of analysts who shared their sentiments with The Block.
Kbit’s CEO Ed Tolson remarked,
“Institutional market makers, who are anticipated to be the counterparties in these trades, could potentially find themselves short gamma. Consequently, they might be compelled to purchase as the price climbs and vend as it falls, potentially magnifying volatility.”
Meanwhile, Michael Harvey, the head of franchise trading at Galaxy Digital, anticipated a brief surge in volatility which could taper off in the long run.
“Initially, we anticipate retail traders outnumbering institutions, leading to heightened volatility. However, as institutions begin embracing yield-generation strategies like selling volatility, this could temper the overall market volatility.”
Harvey’s expectations regarding volatility were akin to Pompiliano’s predictions.
To conclude, analysts expressed confidence that the approval of these options would infuse greater liquidity into BTC markets. Nevertheless, there seems to be a split consensus concerning the impact on volatility and pricing in both the short and long term.