Grayscale Takes Major Leap: Urges SEC Options Trading On Bitcoin ETFs, Eyeing $100 Billion Inflows

Asset manager Grayscale is reportedly pressing the US Securities and Exchange Commission (SEC) to approve options trading on the spot Bitcoin (BTC) exchange-traded funds (ETFs). The move would make the product more accessible to more investors.

Grayscale Urges SEC To Approve Options On Bitcoin ETFs

According to a Reuters report, in a letter sent to the SEC, Grayscale CEO Michael Sonnenshein argued that rejecting options on its Grayscale Bitcoin Trust (GBTC) would “unfairly” discriminate against its shareholders. 

Sonnenshein highlighted that the SEC has previously approved options on ETFs linked to Bitcoin futures. Grayscale’s CEO emphasized the importance of allowing exchange-listed options on GBTC and other spot Bitcoin ETFs for the benefit of investors.

The approval of spot Bitcoin ETFs has proven successful, leading to increased trading volume and Bitcoin accumulation. Bitcoin is on track for a monthly gain of over 47%, the largest since December 2020, driven in part by the introduction of these ETFs. 

Capitalizing on this excitement, asset managers are now submitting proposals for a second wave of more complex crypto products, including those that use options to amplify Bitcoin’s volatility, according to the report.

Potential $100B Attraction

Options give holders the right to buy or sell an asset at a predetermined price within a specific timeframe. However, the report notes that receiving regulatory approval for options on the new Bitcoin ETFs could take several months. 

The SEC oversees the technical rule changes required for option listing, typically approving shortly after an ETF starts trading. However, due to the classification of Bitcoin as a commodity, approval from the Commodity Futures Trading Commission (CFTC) may also be necessary, further complicating the regulatory process.

The introduction of options is crucial for large investors who face risk management issues without this additional tool. Analysts have suggested that options trading could attract as much as $100 billion into the ETFs. 

Grayscale’s Sonnenshein explained that options would facilitate price discovery in the ETF shares, enabling investors to navigate market conditions, hedge risks, and generate income.

Moreover, including options would bring Bitcoin further into the regulatory framework by allowing regulated market participants, such as contract merchants and broker-dealers, to trade these products. This would help foster a regulated environment and enhance market participation.

Ultimately, Grayscale’s efforts seek to ensure fair access to options trading, providing investors with additional tools for risk management and contributing to the growth and maturation of the Bitcoin market.

The SEC’s decision on this matter will have significant implications for the future of Bitcoin ETFs and the broader cryptocurrency industry.

Currently trading at $62,500, BTC has gained 2.5% in the past 24 hours alone, continuing its 166% year-to-date uptrend.

Featured image from Shutterstock, chart from TradingView.com