Spot Bitcoin ETF Options Are Here. Why You ‘Can’t Overstate’ Their Importance - Ep. 739
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Options are expanding the ecosystem, bringing more traders involved, increasing the liquidity, and liquidity is big fish bait. So you should see more institutions using not only options, but the ETF themselves because of the advent of options being available.
Hi, everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shinn, author of the Cryptopians. I started covering crypto 9 years ago, and as a senior editor at Forbes, was the 1st major media reporter to cover cryptocurrency full time. This is the November 22, 2024 episode of Unchained. Polkadot is the original and leading layer 0 blockchain with over 2,000 plus developers, and the Polkadot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at polka.network/ecosystem/community. FBTC is the fastest growing omnichain BTC asset
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This week, options on BlackRock's Bitcoin ETF, Ibit, launched as well as some others. And Ibit, on its first day, saw $1,900,000,000 worth of these options changing hands on that 1st day. I wondered before we get into the whole discussion if you could just first of all explain what Bitcoin ETF options are and why this launch is so significant.
Yeah. So just, you know, ETFs are trading tools or, you know, can be used in a variety of ways. You can go long or short. But options kind of open up more specific ways to express your opinion. You know, for example, let's say you're just a little nervous about this recent, you know, smelt up in the price of Bitcoin. You could buy a put option, you know, maybe $20 away from the price. That way you can just walk around a little, like, calmer that you won't have an 80% drawdown. Then people, that's a that's a totally rational way to use options. Right.
And and, yeah, just for non traders, put options allow you give you the right to sell at a certain price. It
gives you the right to sell at a certain price. So if Bitcoin went to, like, 60,000, like, in, like, 2 days, you'd feel better because you can you've already you have a contract that allows you to sell it at 80. You've locked in that. Now you you it costs a little bit, though. So there is a price, you know, to pay for the contract. In a way, it's a little bit like insurance on the put side. On the call side, you're it's almost like insurance also in that you're betting on whether the price will go up. So we most of the action on Ibit so far has been on the call side, which generally is very bu
And so then just the fact that these are available now, like, how would you expect that to impact either the price of Bitcoin or the trading of Bitcoin?
Yeah. So options are like they build what what I would call the ecosystem. So if somebody is making a market in the options, they would might might use the futures or even the ETF itself to hedge. So if people are buying a bunch of calls, they'd probably have to hedge using the ETF because they'd be short Bitcoin long. So you gotta buy something to hedge to make sure that you're not long or short Bitcoin. So on the call side, that would probably trickle into Bitcoin ETFs in terms of the market makers buying ETF as a hedge. So that's positive. But let's say that it shifted the put side. It coul
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