Since yesterday, options for Bitcoin ETFs have been traded, including options from BlackRock, BITWISE, etc. For most investors who do not have financial knowledge, they may not understand what will be different in the era of Bitcoin ETF options. The Bitcoin ETF approved in January 2024 only allows more financial investors to buy and sell Bitcoin more conveniently from the stock exchange market. But this is not a product that large institutions like. ETFs are relatively spot, which means they can only go long. But the larger and more active volume in the financial market comes from options. Institutional investors prefer flexible options products with higher returns. You can go long, go short, or leverage. Some people say that exchanges can go long, go short, and leverage, right? However, due to compliance reasons, it is difficult for traditional institutions to open accounts and trade as freely as ordinary retail investors. With the approval of Bitcoin ETF options, traditional institutions can trade freely and in compliance with regulations in the financial market. So what are the effects? When an institution wants to go long or short Bitcoin ETFs, it needs to hold Bitcoin ETFs, because options also require physical delivery.
In this way, whether the institution is long or short, it needs to buy Bitcoin ETF. Bitcoin ETF has only one function, which is to buy spot Bitcoin or sell it. When institutions buy Bitcoin ETF, the ETF issuer has to buy Bitcoin. Compared with retail investors who are not very capable of hoarding Bitcoin, the scale of institutions is immeasurable. This means that the sales of Bitcoin ETF will double, and the spot demand for Bitcoin will become high frequency! But there is also an adverse effect. Options have a delivery date, usually Thursday, Friday or the last day of each quarter. Especially on the quarterly delivery date, the trading volume will be larger. Therefore, on the weekly or quarterly delivery date, the volatility of Bitcoin will become larger! This is what we said before, the impact of Bitcoin ETF options on Bitcoin will become greater. In particular, the volatility will exceed the past. The institutionalization of Bitcoin has just begun! It can be estimated that in the absence of malicious events, in the next six months to one year, with the gradual entry of institutions, the supply and demand relationship of Bitcoin ETF will accelerate the imbalance. During this period, the main direction of Bitcoin is to rise, accompanied by large fluctuations! Of course, the maturity of options has passed a certain acceleration threshold, and the volatility of Bitcoin will begin to decrease. If you are an indifferent retail investor, you will be afraid of this kind of fluctuation. But if you make a prediction in advance, this is an era where it is easy to make money!
(This is just a sharing of opinions, not investment advice)
