The Nasdaq and New York Stock Exchanges have reportedly halted their plans for Bitcoin ETF options, which is a major setback for all those investors looking to trade cryptocurrencies more easily.
This comes as both exchanges have backed away from their applications for listing and trading options based on Bitcoin exchange-traded funds (ETFs). In a move that was surprisingly unexpected by most, it has sparked a debate about whether options trading in this space is even possible in the cryptocurrency community.
Regulatory obstacles
The regulatory landscape has been largely static in terms of the challenges facing cryptocurrency innovation. It took nearly a decade of industry effort to get Bitcoin ETFs approved, and the road to options trading remains fraught with obstacles.
The SEC has been extremely cautious, and recent withdrawals by Nasdaq and NYSE only underscore the difficulties involved. Industry players had previously predicted that options could come as early as late 2024, but recent events suggest otherwise.
The Nasdaq and New York Stock Exchange have joined the Chicago Board Options Exchange in withdrawing their applications to allow options trading on Bitcoin ETFs. I expect them to resubmit their applications in the coming days or weeks, as we saw from the Chicago Board Options Exchange. https://t.co/8trtqNBVTx pic.twitter.com/YC1U2SgAVA
— James Seyff (@JSeyff) August 15, 2024
James Seyfart, an ETF analyst at Bloomberg, is one of the bullish voices who believes options trading could start anytime soon. He claimed that the SEC has a threshold to make decisions on several applications, which have included applications for options on Bitcoin ETFs.
But the reality revealed by the recent withdrawals in the wake of those announcements is that exchanges are becoming more risk-averse in a regulatory environment that is still developing. This represents a looming uncertainty for investors looking to options as a trading strategy.
Market Reactions
The market reacted cautiously but strongly to the news. Notably, Bitcoin recently rose above $70,000 after previous selling pressure attributed to ETF-related outflows.
Analysts have pointed out that this could impact trading dynamics, especially the price of Bitcoin. According to investors and analysts, the recent rise in Bitcoin’s value, attributed to easing ETF inflows and a favorable macroeconomic environment, may ultimately prove not to be good enough to maintain investor confidence if options trading does not resume.
Source: Farside Investors
Bitcoin ETF inflows were positive on Thursday after net outflows the day before, according to Data from Farside Investors. Outflows from Grayscale Bitcoin Trust slowed to $25 million, while Grayscale’s Bitcoin Mini Trust (BTC) stabilized at $13.7 million after two days of steady inflows.
According to analysts at Swan Bitcoin, the SEC may be waiting for more stability in the market before introducing additional products. The analysts believe that the agency is cautious about the current volatility of Bitcoin prices, which could make trading options a bit complicated.
looking forward
Bitcoin ETF options have evolved, but their future is uncertain. In fact, some have said that by the end of 2024, the matter will be resolved. However, on the other hand, it is believed that regulation is more complex than it actually appears at first glance and that clearer guidelines could be developed by 2025.
Featured image by Pexels, chart by TradingView