- The U.S. Securities and Exchange Commission approved BlackRock's Bitcoin ETF options to be launched on Nasdaq.
- Options allow for leverage, which has the potential to amplify volatility.
- Bitcoin volatility peaked at 3.2% in August.
The U.S. Securities and Exchange Commission (SEC) on Friday approved options trading on BlackRock's iShares Bitcoin Trust (IBIT) on Nasdaq.
Unlike holding shares of an ETF, options offer leverage. This allows traders to control larger positions with less capital.
This is the basis for Bitcoin's mainstream acceptance after the U.S. Securities and Exchange Commission (SEC) approved 11 spot ETFs in January.
BlackRock, the world's largest asset manager, has led the move, opening new doors for institutional investors to invest in Bitcoin, even if indirectly.
Bloomberg ETF analyst Eric Balchunas said it’s possible that other large companies could get approval to launch their own bitcoin ETF options.
“A huge win for Bitcoin ETF (as it will attract more liquidity and thus more big fish),” Balchunas said on Twitter.
He and fellow analyst James Seyfartt had previously predicted a 70% chance of the bill being approved by the end of May.
Impact on volatility
With options set to become available soon, traders are likely to make more speculative bets, which could exacerbate price swings and spark more market turmoil, the data showed.
A recent report from Kaiko Research highlighted that liquidity fragmentation and price divergence have intensified since the launch of spot Bitcoin ETFs, especially on weekends when market depth is thin.
The trend suggests that the launch of Bitcoin ETF options could exacerbate volatility, especially during periods of market stress.
Despite this, Bitcoin volatility remains relatively low in 2024, with a peak of just 3.2% in August, well below the 4-5% levels of previous years.
