Bitcoin ETF Options Predicted to Launch by 2025 for Investors

After gathering dust for months, applications to list options on spot Bitcoin (BTC) exchange-traded funds (ETFs) are finally getting attention from regulators. Expect BTC ETF options to start trading on United States exchanges this year—a move that could significantly impact the landscape of crypto investments. Not to be left behind, Ethereum (ETH) ETFs will soon follow suit.

Understanding Options and Their Importance

Options are contracts that grant the right to buy or sell—referred to as “call” or “put” in trader parlance—an underlying asset at a certain price. They are attractive hedging instruments and popular with speculators. Imagine if you had locked in the right to sell BTC at $73,000 during its peak; that’s the level of security options can offer investors. The launch of BTC ETFs in January was significant, but the introduction of BTC ETF options is expected to be even more impactful.

Why Options Matter for Institutional Adoption

Options are critical for institutional adoption, especially with highly volatile crypto ETFs. Institutional investors like financial advisors and hedge funds often rely on options to mitigate risks associated with sharp market movements. For example, financial advisors—who control as much as half of investment flows in the $9 trillion ETF market—use options to safeguard against drastic changes in asset prices.

Regulatory Shifts: The SEC’s Role

In January, the three major US equities exchanges that list spot BTC ETFs—New York Stock Exchange (NYSE) Arca, Cboe, and Nasdaq—asked the Securities and Exchange Commission (SEC) for permission to list options on those funds. Initially, the SEC responded with a deafening silence, causing industry concerns.

However, private watchdogs like Better Markets Inc. urged the SEC to tread cautiously, highlighting potential risks to retail investors, reminiscent of the GameStop meme stock frenzy in 2021. As a result, the SEC delayed its decision multiple times but seems to be warming up to the idea. On August 8, Cboe filed an amended application addressing issues like market manipulation and position limits in greater detail.

“There’s definitely some movement on Bitcoin ETF options,” Bloomberg Intelligence analyst James Seyffart stated in a post on X. Bloomberg predicts that spot BTC options will go live in the fourth quarter, likely before November due to election-year pressures on the SEC. [Read more](https://www.sec.gov/) about SEC’s current stance on crypto regulations.

The Growth Potential of BTC Options Market

Meanwhile, US investors have free rein to trade options on a less favorable class of Bitcoin ETFs—those that synthetically track BTC’s price using futures. These futures ETFs generally underperform spot market equivalents because the cost of rolling over monthly futures contracts drags down overall returns.

For instance, the most popular Bitcoin futures ETF—ProShares’ Bitcoin Strategy ETF (BITO)—underperformed the spot market by around 2.6% between January and May, according to crypto researcher K33 Research.

Despite this, the market for these options remains hot, with open interest on BTC futures ETFs exceeding $3.25 billion as of August 9, as per the Options Clearing Corporation. For comparison, the combined net asset value of all BTC futures ETFs is approximately $4.3 billion.

Given that spot BTC ETFs command a vastly larger asset base—more than $58 billion—the introduction of options on spot BTC ETFs could create a nearly $45 billion new market.

Implications for Institutional and Retail Investors

Options are pivotal market infrastructure and signify an important milestone for mass crypto adoption. Financial advisors and hedge funds use strategies like the “covered strangle” to manage client portfolios, making options a lucrative tool. Financial giants like Morgan Stanley, which manages around $3.75 trillion in assets, have already given their advisors the green light to pitch spot BTC ETFs to clients. The addition of options can make these products even more attractive to institutional capital.

Spot ETH ETFs on the Horizon

Following closely behind Bitcoin, the Ethereum market is also gearing up for options trading. Nasdaq asked the SEC for permission to list options on BlackRock’s iShares Ethereum Trust (ETHA) per an August 6 filing. This underscores the growing interest in crypto assets beyond Bitcoin.

The Road Ahead

As we approach the end of 2023, expect to see a broader adoption of crypto ETFs and options, opening new avenues for both institutional and retail investors. While the market matures, it’s essential to remain informed and cautious, as the financial landscape rapidly evolves.

Given the current regulatory and market dynamics, the introduction of BTC and ETH ETF options represents a groundbreaking development poised to shape the future of crypto investing. Keep an eye on this space, as the evolution of the crypto market continues unabated.

For those looking to stay updated on regulatory changes and market trends, [Bloomberg](https://www.bloomberg.com) and [Cointelegraph](https://cointelegraph.com) offer comprehensive insights and analysis.

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Author’s Note:
Alex O’Donnell is a senior writer for Cointelegraph, previously a financial journalist at Reuters, where he covered M&A and IPOs. He is also the crypto growth lead at startup accelerator Expert Dojo. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views expressed are the author’s alone.