Nasdaq Plans to Launch and Trade Options on a Bitcoin Index Following SEC Approval

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 Securities and Exchange Commission (SEC) is yet to approve any options based on exchange-traded funds (ETFs) that track spot bitcoin prices, despite Nasdaq’s application to trade options on BlackRock’s $21.3 billion iShares Bitcoin Trust ETF.

However, the SEC has approved several options on ETFs that track bitcoin futures prices, such as the ProShares Bitcoin Strategy ETF (NYSE: BITO). These options provide institutional investors and traders with an alternative way to gain exposure to bitcoin.

According to Matt Hougan, chief investment officer at Bitwise, having choices is crucial for fully normalizing bitcoin as an asset class. He argues that these options could effectively fill the gap in the liquidity environment created by the lack of ETF choices.

“For a complete market structure to be created for bitcoin, these ETF options are necessary to enhance liquidity and provide investors with more powerful tools,” Hougan said.

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.

As the SEC continues to evaluate these options, traders have turned to alternative products, such as leveraged ETFs linked to bitcoin and options on those funds.

Following the SEC's approval of the underlying ETFs in January, exchanges initially filed applications for spot bitcoin ETF options. However, these applications have since been amended in response to comments from the SEC.

Also Read: NYSE, Nasdaq ISE Withdraw Proposals for Bitcoin, Ether ETF Options