The launch of options tied to BlackRock’s iShares Bitcoin Trust (IBIT) has marked a significant milestone for bitcoin, even as regulators imposed strict position limits on these new derivative products. IBIT, the first spot bitcoin ETF in the U.S., began trading options on the Nasdaq on Tuesday, gaining a one-day head start over competing products set to launch later on Wednesday.
Despite the 25,000 contract position limit, IBIT options managed to exceed $2 billion in notional exposure on their first day. The ETF itself saw over $4 billion in trading volume, trailing only major ETFs like the SPDR S&P 500 Trust (SPY), Invesco QQQ Trust (QQQ), and iShares Russell 2000 ETF (IWM), which have significantly higher market caps.
Unprecedented Success Amid Regulatory Constraints
Senior Bloomberg ETF analyst Eric Balchunas celebrated the success of IBIT options on day one, noting that $1.9 billion is an unheard-of amount for a single day. He compared it to the $363 million that the ProShares Bitcoin Strategy ETF (BITO) earned in its first four years. However, Balchunas pointed out that this impressive figure was achieved with the 25,000 contract position limits in place.
Jeff Park, the head of alpha strategies at Bitwise, elaborated on the unfair treatment of bitcoin ETF options compared to traditional finance products. He explained that the realized risk, representing the total value of exercised option contracts or those converted into actual shares, is less than 0.5% of IBIT shares outstanding. In contrast, the industry standard approaches 7%. To put the 0.5% figure into perspective, CME Bitcoin futures can be traded with 2,000 contracts, equivalent to 175,000 for IBIT.
For me, it’s clear CME Group would prefer to trade Bitcoin predominantly as a futures product, positioning itself as the dominant marketplace with launches like ‘BFFs [Bitcoin Futures Friday].’ If the CFTC was as politicized as the SEC, we wouldn’t have gotten a fair launch at all.
Jeff Park, Head of Alpha Strategies at Bitwise
Bitcoin Hits New All-Time High
Even with the limitations placed on bitcoin-related products, BTC managed to reach new all-time highs above $94,000 yesterday. Furthermore, data from Glassnode shows that open interest in options, representing the dollar value of active contracts, surpassed $40 billion for the first time. While options are a much smaller product than futures, which have $60 billion in open interest, the launch of these additional products could help options catch up soon.
ETFs See Massive Inflows
In addition to the explosive news about U.S. spot bitcoin ETFs, data from Farside shows that they recorded net inflows of $816.4 million, bringing the total net inflows to $28.5 billion. This surge in institutional adoption, coupled with the launch of options trading, has fueled the latest bitcoin price rally.
As the cryptocurrency market continues to mature and gain mainstream acceptance, the introduction of new investment vehicles like bitcoin ETF options is expected to attract more institutional investors and potentially drive prices even higher. However, the regulatory landscape remains a key factor to watch, as position limits and other restrictions could impact the growth and liquidity of these products.
