As a seasoned analyst with over two decades of experience in the financial industry, I have witnessed the evolution of various markets and assets. The upcoming launch of options on Bitcoin ETFs in the U.S. by early 2025, as predicted by James Seyffart from Bloomberg Intelligence, is an exciting development that I believe will significantly impact the crypto market.
As predicted by analyst James Seyffart from Bloomberg Intelligence, it’s anticipated that options for Bitcoin exchange-traded funds (ETFs) will debut in the United States as early as the beginning of 2025.
According to a report by Alex O’Donnell for Cointelegraph, during the Permissionless conference on October 9, Seyffart suggested that some options might get approved by the end of this year, but it’s more probable that we’ll see them in early 2025.
Tomorrow morning, you’ll find me on stage at Permissionless, scheduled for 10:30 AM in Salt Lake City. I’ll be engaging in a debate with @biancoresearch. We’re joining forces with @fejau_inc to discuss the outcomes, whether triumphant or challenging, of the recent launches of Bitcoin and Ethereum ETFs.
— James Seyffart (@JSeyff) October 8, 2024
On September 20th, the U.S. Securities and Exchange Commission (SEC) gave Nasdaq permission to list options related to BlackRock’s Bitcoin ETF, called the iShares Bitcoin Trust (IBIT). Yet, these options are yet to receive final approval from the Commodity Futures Trading Commission (CFTC) and the Options Clearing Corporation (OCC). Seyffart noted that unlike the SEC, the CFTC and OCC don’t have set timelines for their decision-making process, which means there might be additional delays.
Financial agreements known as options grant traders the privilege to either purchase or sell a particular asset at a predetermined cost. In case of non-fulfillment of obligations by one party within the U.S., it is the Office of the Comptroller of the Currency (OCC) that assumes responsibility for settling these trades.
Financial advisors often find value in using options, especially when dealing with market fluctuations. Seyffart points out that many advisors express apprehension about Bitcoin’s price fluctuations, specifically its downward trends. Introducing Bitcoin ETF options might help advisors lessen these risks and become more at ease with the asset.
On September 21st, a statement was issued by Jeff Park, the Chief of Alpha Strategies at Bitwise Asset Management. In this statement, he expressed that the SEC’s decision to allow Bitcoin ETF options to be listed and traded signifies a substantial achievement in the financial sector, one that he referred to as an “unprecedented boost in volatility” (volatility of volatility). He underscored the profound impact this development could have on the cryptocurrency market, describing it as the most significant advancement yet for Bitcoin’s future.
Park highlights that one significant feature of this transition is that the value of Bitcoin will now be partially managed within ETF options. He explains that while Bitcoin’s key advantage – its limited supply – has been a strength, it has also presented challenges because it hindered Bitcoin’s ability to create synthetic leverage. This change enables Bitcoin to operate in a regulated market where the Options Clearing Corporation (OCC) safeguards clearing members against counterparty risk. This development, he points out, opens up opportunities for Bitcoin to tap into leveraged possibilities driven by liquidity, enhancing its financial potential compared to traditional markets.
Park also pointed out that Bitcoin is unique because it allows “leverage duration” in its calculations for the first time, enabling traders to access more secure, long-term investments. This is different from daily options, which have their own drawbacks. Instead, Bitcoin options offer stronger, economical strategies, making them an attractive option for investors seeking long-term investment opportunities. Park emphasized that with Bitcoin, investors can potentially achieve higher returns while spending less on premiums compared to traditional fully collateralized investments.
Park further discussed the unique feature of Bitcoin’s volatility skew, often referred to as a “volatility smile.” This means that upward volatility tends to be less costly than downward volatility. This is not common in traditional assets and gives Bitcoin an extra advantage in market transactions. He explained how this translates in real-world trading, specifically focusing on how traders can capitalize on Bitcoin’s negative vanna (a gauge of how the value of an option’s delta changes with price fluctuations). In Park’s opinion, this characteristic functions like a “rocket booster,” intensifying Bitcoin’s price surge and amplifying its potential for leverage.
Primarily, Park emphasized that Bitcoin cannot be watered down, unlike conventional stocks that can have additional shares added, making it more attractive in situations requiring leverage. This characteristic, as he pointed out, distinguishes Bitcoin from commodities such as oil or gas, which are limited by delivery restrictions. In his final remarks, Park noted that the authorization of Bitcoin options signifies the debut of a regulated, leveraged market for Bitcoin – an event he considers a groundbreaking development for the cryptocurrency.
If there were one thing to read today re the game-changing nature of Bitcoin ETF options, read (and bookmark) this one for 2025 – it’s going to be wild.
— Jeff Park (@dgt10011) September 20, 2024
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2024-10-10 10:01