U.S. Spot Bitcoin ETF Market Sees New Growth With Options Trading

With the introduction of new choices for spot ETFs, the exchange-traded fund (ETF) market for Bitcoin in the United States is changing. This could entice liquidity and long-term investors to the Bitcoin ecosystem. Unintended effects could also result from it, such as an increase in the “paper supply” of Bitcoin, which gives investors exposure to the asset without really participating in the market.

SEC Approval Spurs New Trading Tools

Recently, CryptoQuant revealed that the U.S. Securities and Exchange Commission (SEC) approved options for BlackRock’s iShares Bitcoin Trust (IBIT), the largest spot Bitcoin ETF. This marks a major step forward in integrating Bitcoin-related products into traditional financial systems.

Options are derivative contracts enabling investors to buy or sell cryptocurrencies like Bitcoin at a predetermined price by a specific date. With these tools, investors can capitalize on market shifts without actually owning the underlying asset. The introduction of IBIT options provides another method for hedging or speculating on Bitcoin’s price, driving increased interest from institutional players.

According to CryptoQuant, this move underscores the growing regulatory acceptance of Bitcoin financial products and paves the way for broader institutional participation.

Bitcoin options trading has surged on the Chicago Mercantile Exchange (CME), reaching record levels in 2023. In March, open interest in Bitcoin options peaked at nearly $500 million—an impressive fivefold increase compared to last year. These long-term contracts have gained popularity among traders looking beyond short-term price fluctuations.

CryptoQuant highlighted that CME’s Bitcoin options often feature expiration dates stretching from four to five months. Meanwhile, a significant portion of the total open interest in 2022 occurred as investors chose to short Bitcoin during market downturns, with a noticeable rise in perpetual futures markets on crypto exchanges.

Although options trading adds liquidity, it also allows investors to bet on Bitcoin’s price movements without ever owning the asset itself. This dynamic could increase the “paper supply” of Bitcoin, creating scenarios similar to those witnessed during the 2022 bear market.