The imminent launch of spot Bitcoin exchange-traded fund options in the United States could be a huge deal as extra liquidity could entice a new wave of institutional and retail investors, according to industry executive Joe Consorti.
“The floodgates for Bitcoin’s next evolution in financial markets are about to open,” as the first spot Bitcoin (BTC) ETF options are set to start trading in the United States on Nov. 19, said the head of growth at Bitcoin custody firm Theya, Joe Consorti, in a video shared on X on Nov. 19.
“The launch of spot Bitcoin ETF options, specifically for the IBIT vehicle, mark the beginning of a new era for price dynamics, volatility and institutional adoption,” he added.
On Nov. 18, the Options Clearing Corporation (OCC) said it was preparing the launch of the investment vehicles, beginning with the BlackRock iShares Bitcoin Trust (IBIT).
Meanwhile, the head of ETP listings at Nasdaq, Alison Hennessy, said the exchange intended to list and trade spot BTC ETF options as early as Nov. 19.
Spot Bitcoin ETF options are financial derivatives that give investors the right, but not the obligation, to buy or sell shares of spot crypto ETFs at predetermined prices.
Bloomberg’s senior ETF analyst Eric Balchunas exclaimed that this was a “BFD” (big f***ing deal), sharing Consorti’s video on X on Nov. 19.
Spot bitcoin ETF options begin trading on the Nasdaq tomorrow.
Here's why it matters.
[B2YB @TheyaBitcoin] pic.twitter.com/BgDXmXI66M
— Joe Consorti ⚡️ (@JoeConsorti) November 19, 2024
Consorti explained that options are the foundations of capital markets as they provide liquidity, price discovery, and risk management tools, particularly for institutional investors that “drive a lot of the core of the market.”
“This matters hugely because, in traditional markets, derivatives are ten to twenty times the size of the underlying market cap,” but with Bitcoin, listed derivatives are less than 1% of the $1.8 trillion spot market cap, he said.
Bitcoin derivatives are “vastly underdeveloped,” and this limits the market’s maturity because there is a “huge institutional demand” for these products from hedging and allocation perspectives, he added.
Consorti explained that most Bitcoin derivatives are traded offshore or OTC (over-the-counter) on venues such as Deribit, which currently has $31 billion in open interest, while US investors are locked out.
However, the US equity markets are the largest and most liquid in the world, comprising 44% of the $109 trillion global equity market, he said before adding:
“Listing options on Bitcoin ETFs brings BTC into the largest capital market in the world, and unlocks unprecedented opportunities because of this, namely liquidity in depth.”
Additionally, previously excluded retail investors can now join the Bitcoin derivatives market, “significantly expanding the investor base,” he continued.
Consorti concluded that as derivatives markets grow, BTC will follow the path of equities and commodities, where derivatives are ten to twenty times the size of the spot market. This could unleash trillions of dollars in potential trading volume, he said.
“Listing options on ETFs opens the doors to the largest and deepest liquidity pools on the planet,” and major market makers, institutional capital, and retail investors can now all “participate at scale.”
In October, trading firm QCP Capital said Bitcoin ETF liquidity would surge after the SEC approved options trading on the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE).
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