Analysis: Bitcoin Spot ETF Options Trading Will Increase Market Liquidity and Reduce Volatility
2024-09-25 03:18:42
On September 25th, Nate Geraci, president of The ETF Store, predicted that once bitcoin spot ETF options trading begins, there will be "a series" of new applications, such as "bitcoin buffer or definedoutcomeETF, bitcoin premiumincome or yieldmaxETF, bitcoin tailrisk ETF and bitcoin convexity ETF, etc."
Meanwhile, it will attract more liquidity, which in turn will "attract more large players", says Eric Balchunas, senior ETF analyst at Bloomberg.
Retail traders typically use options for speculation, while large institutions use options for hedging. Market structure analyst Dennis Dick said bitcoin has a large retail following, which means there is likely to be more speculation in bitcoin ETF options compared to stock ETF options.
"Contrary to popular belief, options actually reduce volatility," Dick said in an email. "As unpositioned squaring contracts increase, it creates natural buyers and sellers on both sides of the market... which adds liquidity to the market and thus reduces volatility.
Because of this, Dick expects that as interest in trading options on Bitcoin ETFs increases, the volatility of the underlying asset of the ETF, known as Bitcoin, will decrease.
Meanwhile, it will attract more liquidity, which in turn will "attract more large players", says Eric Balchunas, senior ETF analyst at Bloomberg.
Retail traders typically use options for speculation, while large institutions use options for hedging. Market structure analyst Dennis Dick said bitcoin has a large retail following, which means there is likely to be more speculation in bitcoin ETF options compared to stock ETF options.
"Contrary to popular belief, options actually reduce volatility," Dick said in an email. "As unpositioned squaring contracts increase, it creates natural buyers and sellers on both sides of the market... which adds liquidity to the market and thus reduces volatility.
Because of this, Dick expects that as interest in trading options on Bitcoin ETFs increases, the volatility of the underlying asset of the ETF, known as Bitcoin, will decrease.
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