BlackRock’s iShares Bitcoin Trust (IBIT) is set to make waves in the financial markets as the U.S. Securities and Exchange Commission (SEC) has approved the listing and trading of options on its Bitcoin spot ETF.
Research firm CryptoQuant said the approval is expected to increase market liquidity, attract long-term investors and drive greater participation in the bitcoin market.
The introduction of options on the IBIT Bitcoin Spot ETF will provide investors with tools to hedge or speculate on Bitcoin price fluctuations. This is another step towards broader institutional adoption of Bitcoin, a trend that has been accelerating in recent years.
CryptoQuant noted that being able to trade options means BlackRock’s IBIT ETF will allow investors to manage their risk profile more effectively, giving them more confidence to enter the cryptocurrency market.
Options signal an increase in Bitcoin shorts
CryptoQuant noted that “options could also mean that the ‘paper’ supply of Bitcoin will increase, as investors can gain exposure (buy or sell) to Bitcoin through options trading without having to invest in the spot market, and can both go long without actually buying Bitcoin, and go short/sell without first buying Bitcoin.”
The chart below from CryptoQuant shows the supply of Bitcoin in the perpetual futures market on cryptocurrency exchanges, measured by the amount of open interest in Bitcoin. During the 2022 bear market, open interest increased from 279,000 Bitcoin to 549,000 Bitcoin, allowing investors to short Bitcoin.
Bitcoin has historically been viewed as a highly volatile asset, but options offer a way to mitigate some of that risk, allowing investors to hedge positions or enter into speculative trades with limited downside risk.
This surge in liquidity mirrors trends in the Chicago Mercantile Exchange (CME) Bitcoin options market, with open interest hitting an all-time high of nearly $500 million on March 12, 2024. This is five times the 2023 level, demonstrating the growing demand for Bitcoin-related derivatives.
Overall, the approval of IBIT options trading is seen as an evolution in the Bitcoin market, opening new doors for both institutional and retail investors.
CryptoQuant analyst Ki Young Ju said that with the approval of spot ETFs and now options, the U.S. market appears to be dominating Bitcoin holdings again.
SEC Delays Decision on Ethereum ETF Options
The U.S. Securities and Exchange Commission (SEC) has delayed its decision on Nasdaq’s proposed rule change regarding the listing and trading of BlackRock iShares Ethereum Trust (ETHA) options. Originally expected to be made on September 26, the decision has now been pushed back to November 10.
In a press release , the SEC said the delay would give it time to assess the potential impact of the move on market stability.
