Why Bitcoin ETF Options Could Unlock Massive Amounts of Capital for Crypto - Ep. 711
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The options unlock maybe more lending against ETFs. And then if that's true, right, what does that be? And that means there's gonna be more capital flowing through the ecosystem. And what we saw last cycle is when you have more capital that's, you know, freely available against the majors, that capital generally flows down the risk spectrum into less liquid and more volatile asset. Hi,
everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto 9 years ago and as a senior editor, Forbes was the 1st mainstream media purter to cover cryptocurrency full time. This is the September 27th 2024 episode of Unchained. Looking to elevate your crypto trading? Get 0 trading fees, boosted rewards, and priority support with Coinbase 1. Get a free month with code unchained@coinbase.com/one. Fbtc is the fastest growing Omni chain BTC asset this summer. Join fbtc points inspired campaign where yo
Laura. Thanks for having me.
Last week, the SEC approved options for BlackRock's ETF, Ibit. There's still more approvals necessary, but Eric Welchunas of Bloomberg Intelligence tweeted that he expected that they would be approved in, quote, short order. He called this a huge win for Bitcoin ETFs. Can you explain what options are, what this news means, and why it's significant? For
sure. So options are a form of derivative, which means it's a contract between 2 parties that allows some transfer of risk between 1 party to the other. So the most common type of derivative is obviously a future or most people in crypto are familiar with perpetual swaps. That's a entirely linear derivative, which means, you know, if the asset, the underlying asset goes up or down, the linear instrument, the future or the perpetual swap also appreciates or depreciates by the same amount in value. For an option, it's asymmetric, right? So it's the right, but not the obligation to buy or sell so
Okay. And so why is it that people are pretty excited about this news, about the iBid options?
Sure. So options themselves have existed for many, many years across many different asset classes, equities and interest rates and commodities. For crypto, it's a newer development. I'd say they really came into their own in around the early 2020. That was really the advent of venues like Derabit, which is one of the original crypto options exchanges. And it's, it's very crypto native, that venue in the sense that it's, funded by crypto, like you deposit crypto, Bitcoin, or Ethereum as collateral against the options that you buy and sell, and the options themselves pay out in crypto. So it's,
And then what would the effects be on the price of the underlying of this of Spot Bitcoin? Sure.
So there's been a lot of words kind of spoken, written about this in on on crypto Twitter and on podcast. I think a lot of people there's kind of 2 camps. Right? There's one camp that says, this means there's gonna be a lot of retail users piling into, you know, very short dated options. The same way we've seen on meme stocks, like games, GameStop, and AMC. We kinda saw this with the rise of Wall Street that's people using very short handed options to create what's called a gamma squeeze. So what that means is if there's an accelerated move, it just keeps going because they're buying these opt
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