iShares Bitcoin ETF Options to Curb Volatility and Expand Investor Base, Says Galaxy Digital

Options trading on the iShares Bitcoin Trust ETF has started on Nasdaq, marking a new phase in crypto market development.
Alex Thorn from Galaxy Digital suggests that options trading will reduce Bitcoin’s volatility and increase its investor base.
The first day’s trading showed a strong preference for call options, indicating optimism about Bitcoin’s price rise.
Despite a new all-time high of US$94,002, Bitcoin’s volatility remains attractive to many investors.

The crypto market is having yet another breakthrough moment as options trading on Spot Bitcoin exchange-traded funds (ETFs) is now open for iShares Bitcoin Trust on Nasdaq.

According to Galaxy Digital’s Alex Thorn, this will only drive Bitcoin adoption higher while reducing volatility.

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The firm’s head of research told Bloomberg that options trading will also increase the investor base:

Over time as it’s more widely held, volatility will decrease, options will help dampen volatility and as volatility comes down people can take larger position sizes.

Galaxy Digital’s Alex Thorn

Options Trading Saw Spectacular First Day

Nasdaq Inc. has introduced options for the Bitcoin ETF for the first time, hoping to draw more institutional investors to Bitcoin by allowing them to hedge and enhance liquidity. While options could reduce Bitcoin’s volatility and shift its perception from a high-risk asset to one with fundamental use cases, volatility remains a key attraction for many investors, Thorn added.

As so-called financial derivatives, options grant buyers the right, but not the obligation, to buy or sell a set amount of an underlying asset at a specified price by a set date. In this case, the underlying asset is BlackRock’s iShares IBIT ETF, which is linked to Bitcoin.

Bloomberg Senior ETF Analyst Eric Balchunas said the first day of trading went exceptionally well, although it doesn’t put it at the “big dog level”, he wrote on X.

Fellow analyst James Seyffart wrote that trading included 289,000 call options and 65,000 put options.

UPDATE: Final tally of $IBIT‘s 1st day of options is just shy of $1.9 billion in notional exposure traded via 354k contracts. 289k were Calls & 65k were Puts. That’s a ratio of 4.4:1. These options were almost certainly part of the move to the new #Bitcoin all time highs today pic.twitter.com/IN3s9hajJ2
— James Seyffart (@JSeyff) November 19, 2024

Call options are bets that the price of Bitcoin will increase, allowing investors to buy at today’s lower prices in the future.

Put options are bets that the price will decrease, allowing investors to sell at today’s higher prices in the future. The ratio of calls to puts was 4.4:1, indicating a stronger belief among traders that Bitcoin’s price would rise.

Bitcoin Makes New ATH, Spot ETFs Continue Accumulation

This comes as BTC made a fresh new all-time high again today, hitting US$94,002 (AU$143,853) for the first time ever in the early morning trading hours, Australian Time.

Meanwhile, the US Spot Bitcoin ETFs have seen just shy of US$600 million (AU$918 million) in net inflows in this week’s trading sessions so far. This comes after some pretty heavy inflows last week which ended in profit taking Thursday and Friday.