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- The market expects U.S. Bitcoin spot ETF approval next week, but options data hints at little price impact.
- Options contracts expiring in January show surprisingly low volatility and trading activity.
- Greeks.live suggests the market has already “priced in” the potential ETF approval.
Crypto options market trading platform Greeks.live has poured cold water on expectations of a significant price surge that could follow the U.S. regulator’s permission of a Bitcoin spot exchange-traded fund (ETF).
In a recent tweet, Greeks.live reported on speculation circulating in the market regarding the U.S. SEC’s potential authorization of the Bitcoin spot ETF application. According to the tweet, there is anticipation that the regulator could greenlight the ETF as early as next Tuesday, January 2, 2024.
Such development is expected to be pivotal for the crypto market, as it would allow investors to trade Bitcoin-backed ETFs on regulated exchanges. However, the tweet highlighted the surprisingly low market activity in response to the news.
There is news in the market that the SEC will pass the Bitcoin Spot ETF application as early as next Tuesday, but there was little volatility across the major term IVs and the price.Looking at the options data, Jan12 options IV, which is strongly correlated to the ETF, fell… pic.twitter.com/f1B4ZPC05d— Greeks.live (@GreeksLive) December 31, 2023
In particular, Greeks.live observed a noticeable lack of volatility across major term implied volatilities (IVs) and their prices. Notably, term IV is a measure of the market’s expectation of future price movements in options contracts.
Upon analyzing the options data, it was discovered that the options contracts expiring in January 2024, typically most affected by Bitcoin ETF (TSX:EBIT) news, saw their implied volatility decrease instead of rising.
Additionally, it was mentioned that the trading block associated with these options was almost inactive. Specifically, it contributed only 2% of the day’s total options turnover—an unusually low level of activity that is seldom seen.
Based on these observations, Greeks.live argued that the market has already factored in the potential approval of the Bitcoin spot ETF. In other words, the market participants might have anticipated the event and adjusted their positions accordingly, making the actual approval have a minimal impact on prices and volatility.
“We can assume that the market has priced the ETF, and even if it succeeds, it may not result in greater returns,” the market tracker submitted.
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