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BlackRock, the world’s largest asset manager, has officially launched options trading for its Bitcoin ETF, the iShares Bitcoin Trust (IBIT). This debut comes after the ETF received regulatory approval in January and has since picked up significantly inflow.
Increased liquidity and reduced volatility on the horizon
According to Bloomberg, the introduction of options trading on the $43 billion iShares Bitcoin Trust is expected to reduce volatility while broadening Bitcoin’s investor base.
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Alex Thorn, head of enterprise research at Galaxy Digital, said this during a Bloomberg Televisie interview that as Bitcoin becomes more widely owned, its volatility is likely to decrease. “Options will help dampen volatility, and as volatility decreases, people can take larger positions,” he explained.
Thorn noted that there was a decrease in inconstancy It could change investor sentiment and push them to view Bitcoin as a viable asset for fundamental use cases, rather than just a speculative gamble.
The availability of options will also allow institutions to hedge their positions more effectively, increasing liquidity and potentially impacting retail trading during the crisis bullish market conditions.
Call options dominate BlackRock’s Bitcoin ETF on day 1
Bloomberg ETF analysts Eric Balchunas and James Seyffart reported that on the first day of options trading, total theoretical exposure for IBIT was nearly $1.9 billion across 354,000 contracts.
Of these contracts, 289,000 were calls, while 65,000 were puts, resulting in a bullish call-to-put ratio of 4.4:1. Seyffart claimed that this overwhelming interest in call options helped push Bitcoin to new all-time highs of $94,000 during Tuesday’s trading session for the market’s leading cryptocurrency.
Balchunas, on the other hand pointed out that most options contracts are bullish, especially the December 20 call option, which essentially bets that the Bitcoin price will double within a month. This means that based on current prices, investors expect BTC to reach a new all-time high of just over $180,000 by that date.
The put/call volume ratio for BlackRock’s Bitcoin ETF was “impressive,” said Balchunas, who noted that the 0.17 ratio indicates strong bullish sentiment compared to other ETFs, such as the SPDR S&P 500 ETF (SPY) with a ratio of 1.1.
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Market expert Marty Party highlighted in a post on social media that options on the iShares Bitcoin Trust will be settled in actual Bitcoin. This means that when an options contract is exercised, the settlement will involve the delivery of Bitcoin, giving investors direct exposure to BTC price movements without the need to interact with crypto exchanges.
At the time of writing, the market’s top digital asset is trading at $91,580, up 4% in the weekly time frame after today’s bullish move to its new high.
Featured image of DALL-E, chart from TradingView.com