Nasdaq is awaiting approval from SEC’s regulators to launch and trade options on a bitcoin index, a move that could provide institutional investors and traders with an alternative way to hedge their exposure to bitcoin.
The U.S. Securities and Exchange Commission (SEC) has not yet approved any options based on exchange-traded funds (ETFs) linked to spot bitcoin prices even though Nasdaq has applied to trade options on BlackRock’s $21.3 billion iShares Bitcoin Trust ETF.
Bitwise’s Chief Investment Officer, Matt Hougan, stressed the need to have choices accessible to properly normalize Bitcoin as an asset class. He made the argument that these options might effectively close the gap in the liquidity environment created by the lack of ETF choices.
As stated by Hougan, a thorough market structure must be developed for bitcoin, with ETF options being a key component in improving liquidity and offering investors more powerful tools.
The proposed Nasdaq Bitcoin Index Options will track the CME CF Bitcoin Real-Time Index, a benchmark created by CF Benchmarks that analyzes bitcoin futures and options contracts on the CME Group exchange.
These index options could play a crucial role in normalizing Bitcoin as an asset class, filling a liquidity gap by providing ETF options. Options are derivatives that give traders a cost-effective way to amplify their purchasing power, while institutional investors use them to hedge against risk.
Traders have resorted to alternative products, such as leveraged ETFs linked to Bitcoin and options on those funds, while the SEC continues to assess these choices.
Following the SEC’s approval of the underlying ETFs in January, exchanges started to submit applications for spot bitcoin ETF options. However, these applications have since been modified in response to comments from the SEC.
Also Read: NYSE, Nasdaq ISE Withdraw Proposals for Bitcoin, Ether ETF Options
