According to Reuters, the U.S. Securities and Exchange Commission (SEC) has approved asset management giant BlackRock to list and trade options on a Bitcoin spot ETF on the Nasdaq under the trading code "IBIT."
Investors can increase their investment exposure to Bitcoin at a lower cost by purchasing IBIT options, and conduct risk hedging or speculative trading in a more flexible manner.
It is understood that SEC approval is only the first stage, and approval from the U.S. Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC) is still required before the official listing.
An option is a financial derivative that gives the holder the right (but not the obligation) to buy or sell an asset at an agreed price within a certain period of time in the future. Options are often used as a risk management tool to hedge against market fluctuations or as a speculative tool to obtain potential gains by predicting changes in asset prices.
Bitwise: The biggest positive for the cryptocurrency sector in the second half of the year
Shortly after the news was released, Jeff Park, head of strategy at crypto asset management company Bitwise Alpha, tweeted this morning that the SEC's approval of the listing of Bitcoin spot ETF options may be the biggest positive for the cryptocurrency field in the second half of 2024:
It’s no exaggeration to say that this is the best thing that could happen to the cryptocurrency space in the second half of the year.
We are about to witness the most extraordinary rise in “volatility” in financial history. It will be incredibly wonderful.
Bloomberg senior analyst Eric Balchunas also tweeted today that this is a huge victory for Bitcoin spot ETFs:
Other Bitcoin ETFs are expected to be approved soon, which would be a major win for Bitcoin ETFs.
Because it will attract more liquidity, and in turn attract more big fish. Although the approval time is somewhat unexpected, it is not surprising because @JSeyff and I predicted long ago that there is a 70% chance of approval before the end of May.
The impact of options on Bitcoin
In addition, Jeff Park also published an article carefully explaining the important impact that options have on Bitcoin. The article begins by noting that the nature of regulated options markets, and the powerful power of the two combined, marks the most important development in the crypto market to date.
The article goes on to say that although the limited supply is an advantage of Bitcoin, it also limits Bitcoin from being widely adopted to provide market efficiency. But now, with the options market opening up, Bitcoin can increase leverage through options, thereby improving market efficiency. .
In addition, when market makers short Gamma, causing a Gamma squeeze, the price of Bitcoin will surge abnormally, and the continued rise in price will be more drastic because traders will be forced to keep buying at higher prices.
Shorting gamma is when a trader takes an options position that exposes them to increased risk as market prices fluctuate. Typically this means that when the price of the underlying asset rises, traders must continually buy more of the underlying asset to hedge their positions, and when the price falls, they need to sell more, leaving them vulnerable to severe market volatility. greater risk. This situation can easily trigger a so-called Gamma squeeze, further promoting violent price fluctuations.
In summary, the Bitcoin spot ETF options market is the first time in the financial world that Bitcoin spot has been included as a supply-constrained commodity in a regulated leveraged market. However, Bitcoin is unique in that it still has a parallel, decentralized market that cannot be shut down by traditional exchanges.
