SEC to Review New Rules for Bitcoin Options
The Securities and Exchange Commission of the United States is considering the proposal to handle Bitcoin Options trading. SEC is working on the structure of the surveillance and regulatory mechanism for Bitcoin ETPs.
Policy Changes for Bitcoin Options Trading
On this account, the SEC has launched another round of consultation on a proposed policy change for trading Bitcoin options on ETPs.
A 24th April filing indicated that the security regulator wishes to develop a better understanding of how listing Bitcoin options will affect the overall markets. The agency is focused on determining the impact of Bitcoin options trading and its impact to relieve market stress.
The review will also assess if the current surveillance and enforcement mechanisms are appropriate to handle the unique features of Bitcoin options.
The agency opened the comments from the public regarding the matter that must be recorded within 21 days after the document is officially registered. It means that the stakeholders are allowed to submit a comment by 15th May 2024.
In the same manner, any edits may be submitted until 29th May 2024. Bitcoin options are financial instruments that allow buyers the right to sell or purchase options without being under obligation at a specific price before a deadline.
SEC to Introduce Guidelines for Bitcoin Options Trading
Options are used by traders who are well-versed with pricing and market movements. In the same manner as other investment types, option trading run risks that are not suited for all investors. The commission sought comments regarding policy changes and included feedback in their filings. The majority of responses highlighted how options on Bitcoin ETPs are going to increase liquidity and improve market efficiency.
At the same time, a commentator noticed that approved listing and trading of options on spot Bitcoin ETPs will bring Bitcoin within the regulatory perimeter. The remark noticed that it would also enable regulated market participants such as CFTC-approved designated contracts and SEC-regulated broker-dealers to trade the investment products.
Multitude of financial institutional inclusive of NASDAQ and CBOE have chartered documents to seek approval to trade Bitcoin options.
NASDAQ application calls for listing and trading options on BlackRock’s iShares Bitcoin Trust and CBOE is working on offering options trading on several ETPs that have Bitcoin in reserves. At the same time, asset managers such as Bitwise and Grayscale are seeking regulatory approval to list options on Bitcoin ETFs through New York Stock Exchange applications.
A Bitcoin price analysis published in Cointelegraph indicates that bears are in control with leveraged long positions hitting a 6-month low. However, crypto investors on X believe that it is high time to opt for long positions. On 18th April, Bitcoin futures contracts indicated a demand for short positions that sparked a bearish momentum.
However, the trend was influenced by the lack of inflows in spot Bitcoin ETFs and expectations of rising interest rates in the United States. All of these factors created a negative market.
Since retail investors opt for perpetual futures, exchanges impose a fee on 8-hours which is called funding rate. The rate is positive when buyers or long-position holders have more leverage and negative when seller or short-position holders are in-charge.
Balanced Funding Rate
A balanced funding rate is set around 0.025 per 8-hour or 0.5% on a weekly basis. When the funding rates are negative it is interpreted as a bearish sign. The funding rate for Bitcoin turned negative on 15th April and again on 18th April. These indicate a decline in long-position. This phenomenon happened following a 13.5% decline in Bitcoin prices during 12th April and 18th April.
It showcases that the confidence in bears has risen significantly among market participants. Analysts have interpreted that $72,000 double-top formation is a sign that downtrend is going to persist until June 2024. Marco-economic factors such as inflation were stronger than expectations CPI increased by 3.8% yearly and above the 2% target of the Federal Reserve and retail sales gained 0.7% year-over-year.
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