On October 18, the US Securities and Exchange Commission (SEC) approved a rule change that allows the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE) to offer options trading for multiple spot Bitcoin exchange-traded funds (ETFs).

This decision comes during a period of strong weekly inflows for Bitcoin ETFs, marking their best performance in around seven months.

SEC Greenlights Options Trading

The SEC’s filings revealed that both exchanges were authorized to list options for spot ETF products. However, while the NYSE has full approval for all products, CBOE’s listing excludes Grayscale’s Bitcoin Mini Trust.

“The Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,76 which requires that an exchange have rules designed to prevent fraudulent and manipulative acts and practices, to remove impediments to and perfect the mechanism of a free and open market, and to protect investors and the public interest,” the SEC stated in the two filings.

Read more: An Introduction to Crypto Options Trading

The exact launch date for these options has not been confirmed. However, ETF experts expect the approval to broaden access to crypto-related financial products on major US exchanges. This move will likely increase liquidity around Bitcoin ETFs, draw more participants to the market, and ultimately strengthen the industry.

Jeff Park, head of alpha strategies at Bitwise, highlighted the advantages of ETF options over existing BTC options on platforms like Deribit. He pointed out that ETF options offer cross-margining, which enables integration with multiple assets such as GLD.

Park emphasized that derivatives don’t directly affect Bitcoin supply but allow USD holders to hedge against Bitcoin exposure, which can reduce volatility. He also highlighted that ETF options can enable market conditions to significantly influence large assets like BTC.

“ETF options are the tightropes accelerating flows that convert Bitcoin’s potential energy into kinetic energy, all leading in one direction: higher,” Park concluded.

The SEC’s approval coincides with the ETFs experiencing a remarkable week of inflows. Data from SoSoValue revealed that Bitcoin ETFs collectively pulled in over $2 billion, extending their winning streak to six consecutive days. As a result, the ETFs have now reached $21 billion in total net inflows, driven by strong investor demand.

Read more: How To Trade a Bitcoin ETF: A Step-by-Step Approach

Nate Geraci, president of the ETF Store, believes this sustained momentum reflects the robust retail and institutional interest in Bitcoin ETFs. At this pace, he predicts that BTC ETFs could surpass Gold ETFs in market size within the next two years.

Morgan Stanley disclosed that it holds $272.1 million worth of Bitcoin ETFs (exchange-traded funds), highlighting the financial institution’s increasing stake in the pioneer crypto.

This investment draws attention to the broader trend of major financial players exploring digital assets as part of their portfolio diversification strategies.

Morgan Stanley Holds $272.1 Million Worth Bitcoin ETF

The American multinational investment bank and financial services company’s investment reflects the growing interest of institutional investors in cryptocurrency. This revelation came through a regulatory filing submitted to the US Securities and Exchange Commission (SEC).

The $272.1 million stake is a substantial figure even for a company with $1.2 trillion in assets under management (AUM). This investment represents only about 0.02% of the company’s overall portfolio. Nevertheless, it is notable as part of a wider trend of institutional adoption of Bitcoin and other digital assets.

The filing comes amid a broader move by top-tier financial firms. As BeInCrypto reported, Goldman Sachs and DRW Capital disclosed $600 million in combined spot Bitcoin and Ethereum ETF holdings. The report specified that Goldman Sachs holds $410 million in Bitcoin ETFs, with major investments in BlackRock’s IBIT and Fidelity’s FBTC.

 Taken together, these investments indicate that traditional financial (TradFi) institutions are increasingly comfortable with crypto. It signals that Bitcoin ETFs, in particular, are becoming a critical component of their long-term investment strategies.

Read more: What Is a Bitcoin ETF?

The growing interest in Bitcoin (BTC) among institutional investors is a strong indicator of its increasing acceptance as a legitimate asset class. Bitcoin ETFs offer a regulated and relatively low-risk way for institutions to gain exposure to Bitcoin without directly purchasing the underlying asset.

By investing in Bitcoin ETFs, companies like Morgan Stanley participate in the expanding cryptocurrency ecosystem while managing risk in a more familiar regulatory framework.

Morgan Stanley’s move into Bitcoin ETFs is not its first foray into digital assets after an initial application in 2021. The investment bank has also steadily increased its involvement in cryptocurrency-related products over the past few years.

Earlier in 2024, Morgan Stanley became one of the largest holders of Grayscale Bitcoin Trust (GBTC), a prominent Bitcoin investment vehicle. Its holdings in GBTC suggest a broader strategy to capitalize on the growing institutional demand for crypto assets.

Impact of Bitcoin ETF Adoption on the BTC Market

Morgan Stanley’s investment in Bitcoin ETFs, alongside that of other TradFi players in the space, could have a profound influence. Even a modest allocation of capital from large institutions into Bitcoin-related products has the potential to drive up demand, which could push the BTC price higher.

“If crypto demand rises and Bitcoin gains more acceptance, a 1% allocation by Morgan Stanley could significantly boost the market. Institutional adoption often starts small, but growth will depend on market trends, regulatory clarity, and investor interest. If Bitcoin proves to be a resilient asset and solid portfolio diversifier, scaling up could happen faster than expected,” wrote MAG212 in an X post.

Meanwhile, Bitcoin’s value has risen 12.2% over the last seven days, bringing its price to $67,771 as of writing. With growing institutional interest in Bitcoin ETFs and significant inflows into these funds, the pioneer crypto could see further gains.

On October 14, for example, the Bitcoin ETF market recorded its highest daily inflow of $555.86 million since June 4. This highlights the increasing demand from investors.

As of October 17, the total net assets of spot Bitcoin ETFs were $64.06 billion. This includes major players like BlackRock’s iShares Bitcoin Trust (IBIT), Grayscale’s Bitcoin Trust (GBTC), and Fidelity’s Bitcoin ETF (FBTC). The growing adoption of these funds by financial institutions is a key development in the integration of Bitcoin into TradFi.

Read more: How To Trade a Bitcoin ETF: A Step-by-Step Approach.

Meanwhile, as more institutions like Morgan Stanley invest in Bitcoin ETFs, the line between TradFi and cryptocurrency continues to blur. The trend suggests that Bitcoin and other digital assets may become more mainstream.

This is as institutional investors seek new avenues for growth and diversification in an increasingly complex financial environment.

The crypto market will witness $1.62 billion in Bitcoin and Ethereum options contracts expire today. This volume of options expiring could cause short-term price volatility, potentially affecting traders’ profitability.

Specifically, the Bitcoin (BTC) options due for expiry are valued at $1.25 billion, while those of Ethereum (ETH) are worth $367 million.

Bitcoin and Ethereum Holders Brace For Volatility

According to data on Deribit, 18,583 Bitcoin options will expire today, slightly higher than the 18,271 contracts that went bust last week. The options contracts due for expiry today have a put-to-call ratio of 0.86 and a maximum pain point of $64,000.

Read more: An Introduction to Crypto Options Trading.

On the other hand, 140,320 Ethereum options contracts will expire today, significantly lower than the previous week. They will expire with a put-to-call ratio of 0.62 and a maximum pain point of $2,500.

These data suggest a generally bearish sentiment for both contracts. Bitcoin, currently trading for $67,661, is above its maximum pain point. Similarly, Ethereum is exchanging hands for $2,617 as of writing, well above its strike price.

As the options contracts near expiration, Bitcoin and Ethereum prices are expected to approach their respective maximum pain points. This means BTC and ETH values might drop as smart money is incentivized to push the price toward the “max pain” level.  This is based on the Max Pain theory, which predicts that options prices will converge around the strike prices where the largest number of contracts — calls and puts alike — expire worthless.

The strategy causes option buyers to lose the most value, hence the implied bearish sentiment. Nevertheless, the pressure on BTC and ETH prices could reduce after 08:00 UTC on Friday, when Deribit settles the contracts.

Read more: 9 Best Crypto Options Trading Platforms.

Meanwhile, analysts say Bitcoin and the broader market are looking for a strong push that could see the pioneer cryptocurrency reclaim its all-time high above $73,777. From a macroeconomic perspective, tailwinds are not anywhere near sight. However, CoinShares researchers say the US elections remain the key driver for current market sentiment.

“…investor decisions have likely been more influenced by the upcoming US elections than by monetary policy outlooks. This trend is evident in the fact that stronger-than-expected economic data had little impact on stemming outflows, whereas the recent US vice presidential debate and a subsequent shift in polling towards the Republicans, perceived as more supportive of digital assets, led to an immediate boost in inflows and prices,” a paragraph from the recent report stated.