Welcome to the Forward Guidance newsletter, brought to you by Casey Wagner and Ben Strack. Here’s what you’ll find in today’s edition:

• There’s a new crypto investment tool on the scene. Ben has the details. 

• Trump’s media company saw a boost in share prices yesterday, thanks to crypto. 

• Speaking of, the president-elect has reportedly made his pick to lead the Department of Commerce.

Bitcoin ETF options marks new chapter for the asset class

A new crypto-related financial tool is finally here. 

Spot bitcoin ETFs hit US exchanges in January, and more than 10 months later, investors are able to trade options on the biggest of those products (and others very soon).

As you probably know, an option is a contract representing the right to buy or sell a financial product at a certain price for a specific period of time.

Industry watchers have told Blockworks that options would lead to a more robust ecosystem around the spot ETFs, enhancing liquidity and price discovery.

CK Zheng, CIO of crypto hedge fund ZX Squared Capital, told me today that bitcoin ETF options are “extremely powerful” for institutional investors to better manage their bitcoin exposures under various market conditions. 

Indeed, Anchorage Digital CEO Nathan McCauley said in a statement that the new product shows bitcoin is further “cementing its place alongside stocks, bonds and commodities as a mainstream institutional investment.”

The options can also be used by speculators, Zheng explained, to leverage their bets when they are extremely bullish or bearish on the asset.

Bitwise’s Jeff Park previously noted these options would mark “the first time the financial world will see regulated leverage on a perpetual commodity that is truly supply-constrained.”

Put another way by Joe Consorti in a video on X, listing options on bitcoin ETFs “opens the door to the largest and deepest liquidity pools on the planet.” 

Let’s quickly run through some of the events leading up to these listings: 

• Nasdaq, NYSE and Cboe submitted proposals to the SEC in January to list options on spot bitcoin ETPs.

• Grayscale Investments pointed out the SEC’s quick approval of options on bitcoin futures ETFs in a March blog post, calling on the regulator to do the same for the spot products. But that month, the SEC said it needed more time to consider the proposals.

• The SEC, on Sept. 20, gave “accelerated” approval of options on BlackRock’s iShares Bitcoin Trust (IBIT). About a month later, the SEC greenlit the bids by NYSE and CBOE to list options on other bitcoin ETFs.

• The CFTC last week essentially yielded to the SEC and the Options Clearing Corporation (OCC), saying that the listing of these bitcoin ETF options “does not implicate the CFTC’s jurisdiction.”

• The OCC said in a Monday memo that it was “preparing for the clearance, settlement and risk management” of bitcoin ETF options. A Nasdaq spokesperson confirmed to me later in the day that they intended to list IBIT options on Tuesday.

So here we are. Options on IBIT are available today; that fund has grown to have roughly $43 billion in assets under management — making it by far the largest bitcoin ETF and even bigger than the iShares Gold Trust (IAU).

Grayscale said bitcoin ETF options are set to begin trading on NYSE — the exchange on which its GBTC and BTC products are listed — tomorrow. Bitwise expects the same for options on its bitcoin ETF.

“Many new investors will, no doubt, leverage their experiences in investing in the meme stock options market to bitcoin options,” Zheng said. “The bitcoin ETF options market will compete greatly with Deribit to bring more investors to the US and help build the US as the bitcoin derivative trading center.”

Bitwise’s Park pointed out on X that BTC ETF options will have “cross-margining capabilities in multi-asset portfolios” than an exchange like Deribit “can never provide.” 

He added: “Only spot ETF options can leverage your GLD, SPY, HYG ETFs, bonds, loans, and cross-margin to achieve unmatched capital efficiency — closest thing that looks like free leverage.”

— Ben Strack

The odds of the Federal Reserve cutting interest rates by 25 basis points next month, as determined by fed funds futures prices. This is a decrease from last week, when markets placed the odds at 65%. 

Central bankers earlier in the year said they expected to end 2024 25bps lower than where we are right now. But persistent inflation coupled with a strong labor market could change the committee’s decision.

Shares of Donald Trump’s social media company, Trump Media & Technology, continued to fluctuate Tuesday following a rally spurred by reports that the president-elect is furthering his crypto business interests. 

The Financial Times reported Tuesday that Trump Media is in “advanced talks” to acquire crypto exchange Bakkt — a company founded and owned by New York Stock Exchange parent company Intercontinental Exchange (ICE).

The news pushed Bakkt shares 162% higher Monday and Trump Media (ticker DJT) posted a 17% gain. Bakkt sustained its rally into Tuesday (trading 7% higher midway through the session), while DJT lost more than 8%. 

The social media company began trading on the Nasdaq last spring after a merger with Digital World Acquisition Corp. Currently hovering around $30, DTJ shares are up almost 150% from their September low, but are still trading about 40% off of their IPO price of $50. 

Trump Media’s recent gains have not been linear, though. Shares rose 65% at the end of October, a rally attributed to increased optimism at the time that Trump would win the election. The share price since Trump’s victory however has been flat, posting a modest increase the day after the election before erasing gains. 

The market is, presumably, confused about what a Trump win means for the social media company. Yesterday’s rise shows that investors are decently certain that acquiring Bakkt would be a good move. But the subsequent retreat shows shareholders aren’t exactly sure why. 

We’ll be following the acquisition story and will be writing a lot more about what it means when the majority shareholder of a public company moves into the White House. Stay tuned.

— Casey Wagner

President-elect Donald Trump has nominated a crypto supporter to lead the Department of Commerce. 

The Wall Street Journal (along with Punchbowl News founder Jake Sherman) reported Trump’s expected pick of Cantor Fitzgerald CEO Howard Lutnick for that job on Tuesday morning. Trump later confirmed the selection on Truth Social.

There were previous reports that Lutnick — a leader of Trump’s transition team — was in the running for treasury secretary. 

We highlighted Lutnick’s remarks on bitcoin in a September edition of this newsletter. At the time, the CEO noted that TradFi players — including banks and brokerages — would “go headfirst into bitcoin” when the regulatory environment improved. 

Donald Trump’s election win has seemed to set the stage for that, given the crypto promises he has made (namely, “firing” SEC Chair Gary Gensler).

Bitcoin surged to above $93,900 for the first time just before 2 pm ET Tuesday — up 3.7% from 24 hours prior.  

As BTC “gets invited into this party, up we go,” Lutnick added in a September video posted to X. That comes when banks can more freely clear, custody and transact in bitcoin, Lutnick said — a reality hindered by the SEC’s Staff Accounting Bulletin (SAB) 121, for example.

Aside from being vocally enthusiastic about the crypto segment, Lutnick’s firm has stablecoin issuer Tether as a client — a company that has denied being under federal investigation.

We and others are curious about what roles Lutnick might drop if he indeed takes on this cabinet position, so as not to serve his own business interests.

— Ben Strack

• Prosecutors in Donald Trump’s hush money trial in Manhattan told the court that the president-elect’s sentencing — originally scheduled for later this month — should be postponed, potentially until after his second term ends. Presiding Judge Juan Merchan still needs to rule on the motion. 

• Former FTX chief technology officer Gary Wang, who last year pleaded guilty to four counts of fraud and conspiracy for his role in the exchange’s collapse, will be sentenced Wednesday. Wang is the final defendant to be sentenced in the case against Sam Bankman-Fried.

• Dive deeper into the narratives we covered in today’s newsletter with the Forward Guidance podcast weekly roundup.