The price of Bitcoin punched past another all-time high above the $94,000 mark on Tuesday after options trading on spot Bitcoin exchange-traded funds (ETFs) officially went live, with BlackRock’s iShares Bitcoin Trust (IBIT) product kicking things off.
BlackRock and other asset managers have been seeking to list and trade options for their spot BTC ETFs following the Securities and Exchange Commission’s approval of nearly a dozen Bitcoin ETFs in January. Although the SEC greenlighted the listing and trading options for the IBIT in September, the approval by the Options Clearing Corporation (OCC) on Monday represented the last major hurdle before their launch today.
“A few hundred million so far in options volume on IBIT (a ton for day one),” Bloomberg’s senior ETF analyst Eric Balchunas wrote in a post on X. Balchunas also pointed out that the huge majority of the contracts were calls, suggesting bets that BTC’s price would continue rocketing.
Implications Of ETF Options For The Crypto Market
According to industry pundit and head of growth at Bitcoin custody firm Theya, Joe Consorti, the launch of options trading on spot Bitcoin exchange-traded funds is a huge boon for the top crypto as additional liquidity could unlock a fresh tsunami of institutional and retail investors.
“The floodgates for Bitcoin’s next evolution in financial markets are about to open. The launch of spot Bitcoin ETF options, specifically for the IBIT vehicle, marks the beginning of a new era for price dynamics, volatility, and institutional adoption,” Consorti posited in a Nov. 19 post on X.
Spot bitcoin ETF options begin trading on the Nasdaq tomorrow.
Here’s why it matters.
[B2YB @TheyaBitcoin] pic.twitter.com/BgDXmXI66M
— Joe Consorti
(@JoeConsorti) November 19, 2024
(@JoeConsorti) Consorti noted that options are the cornerstone of capital markets as they offer liquidity, risk management tools, and price discovery, specifically for institutional investors that “drive a lot of the core of the market.”
“This matters because, in traditional markets, derivatives are 10 to 20 times the size of the underlying market cap,” he explained, before adding that with Bitcoin, listed derivatives are less than 1% of the $1.8 trillion spot market cap.
Consorti stated that Bitcoin derivatives are considerably underdeveloped, which hampers the market’s maturity. There is a massive demand for these products from institutional investors to hedge their positions.
The expert further said that the majority of Bitcoin derivatives are traded offshore or over the counter on platforms like Deribit, which currently boasts over $30 billion in open interest, while US investors remain sidelined.
The US stock market is currently the world’s biggest and most liquid, consisting of 45% of the $110 trillion global stock market, he observed, adding:
“Listing options on Bitcoin ETFs brings BTC into the largest capital market in the world and unlocks unprecedented opportunities because of this, namely liquidity in depth.”
Retail investors that previously had no access can now foray into the Bitcoin derivatives market, increasing the user base considerably.
Bitcoin reached a new peak of $94,040.99 early today per data from CoinGecko. At press time, the BTC price had retraced slightly to $93,567.61, still up 2.6% over the past 24 hours. The market cap of the benchmark crypto has now swelled to as high as $1.85 trillion.