Nasdaq and the NYSE have reportedly shelved plans for bitcoin-based ETF options, a move that has severely discouraged investors seeking more accessible cryptocurrency trading.
This comes as both exchanges have pulled their apps for listing and trading Bitcoin ETF-based options. In a move that we can say is surprisingly not what most people were expecting, a debate has raged within the cryptocurrency community about whether options trading in this space is even possible.
Regulatory obstacles
The regulatory landscape has been nearly unchanged in terms of challenges to cryptocurrency innovation. It took the industry nearly a decade of effort to get a spot Bitcoin ETF approved, and the road to options trading remains fraught with obstacles.
The U.S. Securities and Exchange Commission has been very cautious, and the recent delistings by Nasdaq and NYSE only underscore the difficulties of the process. Industry players had previously estimated that options could appear as early as behind schedule 2024, but recent events seem to indicate otherwise.
NASDAQ and NYSE have joined CBOE in withdrawing their applications to allow trading in options on Bitcoin ETFs. I expect they will reapply in the coming days or weeks, just as we saw with CBOE. https://t.co/8trtqNBVTx photo: twitter.com/YC1U2SgAVA
— James Seyffart (@JSeyff) August 15, 2024
Bloomberg ETF analyst James Seyffart is one of the confident voices who believed options trading could begin anytime soon. He claimed that the SEC has a time limit on rulings on several applications, including applications for Bitcoin ETF options.
But the fact that the recent pullbacks after these announcements have revealed is that exchanges are becoming increasingly risk-averse in an ever-evolving regulatory environment. That’s a bit of uncertainty being introduced into the game for investors who are considering options as a trading strategy.
Market reactions
The market reacted cautiously but with some force to the news. Notably, Bitcoin recently rebounded above the $70,000 level due to previous selling pressure attributed to ETF-related outflows.
Analysts have noted that this could have an impact on trading dynamics, particularly the price of Bitcoin. According to investors and analysts, Bitcoin’s recent surge, attributed to easing ETF outflows and a favorable macroeconomic environment, may ultimately prove insufficient to maintain investor confidence if options trading does not resume.
Source: Farside Investors
Bitcoin ETF flows were positive on Thursday after net outflows the previous day, according to data from Thursday. data from Farside Investors. Outflows from the Grayscale Bitcoin Trust fell to $25 million, while the Grayscale Bitcoin Mini Trust hit $13.7 million after two days of stable flows.
According to analysts at Swan Bitcoin, the SEC is likely waiting for more market stability before introducing additional products. Analysts believe the agency is cautious about the current volatility of Bitcoin prices, which could make options trading a bit more complicated.
Looking to the future
Bitcoin ETF options are growing, but their future is uncertain. In fact, some even claim that the matter will be resolved by the end of 2024. On the other hand, it is believed that regulation is much more convoluted than it seems at first glance, and that clearer guidelines could be developed by 2025.
Featured image from Pexels, chart from TradingView
