With the approval of the U.S. Securities and Exchange Commission (SEC) for options trading of BlackRock's spot Bitcoin ETF (ticker: IBIT), the Bitcoin market will usher in more liquidity and speculative opportunities. The opening of options trading has attracted retail and institutional investors, especially retail investors who usually use options as a speculative tool, while institutions mostly use them to hedge risks.
Approval and impact of ETF options trading
The approval of options trading for BlackRock's spot Bitcoin ETF means the further maturity of the Bitcoin market. Eric Balchunas, Bloomberg ETF analyst, believes that this is not only a victory for Bitcoin ETF, but may also trigger the launch of more similar products, including options trading for other spot Bitcoin ETFs.
Nate Geraci, president of ETF Store, pointed out that the launch of options trading will bring more innovative applications, such as Bitcoin ETFs with "buffer mechanisms" or "covered call options" strategies. It is expected that the Bitcoin market will attract more funds and large institutions to participate.
Impact on market liquidity and volatility
Market structure analyst Dennis Dick believes that Bitcoin ETF options will increase market liquidity and further attract the participation of big players. He said that although options trading is speculative, contrary to popular belief, options can actually reduce volatility by increasing liquidity. More open contracts mean that the market is more balanced between buyers and sellers, thereby reducing volatility.
The driving effect of options on Bitcoin prices
Arbelos Markets co-founder Joshua Lim believes that as options trading is carried out, margin loans provided by top brokers through Bitcoin will significantly increase the supply of funds in the market. This money will flow into high-risk areas such as spot Bitcoin ETFs, memecoins and NFTs, driving the investment boom in these assets.
In addition, Jeff Park, head of strategy at Bitwise Alpha, pointed out that the difference between Bitcoin and traditional stocks is that it cannot be diluted, and this feature will amplify the increase in Bitcoin prices during gamma squeeze.
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