The US Bitcoin ETF market is seeing a new wave of developments, with the introduction of trading options that could attract liquidity and long-term investors.
However, a report from CryptoQuant warns that there are challenges associated with this move.
The introduction of trading options for Bitcoin ETFs could increase the paper supply of Bitcoin, allowing investors to gain exposure to Bitcoin without having to buy it on the spot market, which could impact supply and demand dynamics, CryptoQuant reported.
Bitcoin ETF Options Approval:
CryptoQuant revealed that the US Securities and Exchange Commission (SEC) has recently approved the listing of BlackRockâs iShares Bitcoin Trust (IBIT), the largest Bitcoin exchange-traded fund on the market.
This move represents an expansion of Bitcoin-related investment vehicles.
Options are derivative contracts that allow investors to buy or sell Bitcoin at a specified price on a certain future date, allowing them to profit from market movements without having to own the underlying asset.
The IBIT option provides a new way for investors to hedge or speculate on Bitcoin price volatility, reflecting continued institutional adoption and increasing integration between digital assets and traditional financial markets.
Potential increase in the âpaperâ supply of Bitcoin:
Bitcoin options traded on the Chicago Mercantile Exchange (CME) have seen significant growth this year, with open interest hitting a record $500 million on March 12, a five-fold increase from the previous year.
Unlike futures traders, Bitcoin options investors appear to have a longer-term investment perspective.
CryptoQuant analysts noted that most open futures contracts on the Chicago Mercantile Exchange have expiration dates ranging from one to three months, while many options contracts extend for longer periods, some extending to four months or more.
By March, 45% of dollar options contracts had expiration dates greater than five months.
Although Bitcoin options contribute to increased liquidity, they may result in transactions that are not based on an actual purchase of the asset.
