As a researcher with extensive experience in the financial markets, particularly in digital assets, I find the recent approval of spot Bitcoin ETF options by the SEC intriguing and somewhat concerning. While it undeniably brings more liquidity to the Bitcoin ecosystem and attracts longer-term investors, the potential increase in BTC paper supply is a double-edged sword.


In simple terms, the U.S. market for Bitcoin exchange-traded funds (ETFs) is witnessing a fresh influx of trading possibilities, such as options. This new development might draw in more liquidity and long-term investors to the Bitcoin community, but it also comes with a potential downside.

As an analyst, I’ve observed from a recent CryptoQuant report that an expansion in the offerings of spot Bitcoin Exchange-Traded Funds (ETFs) might boost the quantity of paper Bitcoins available. This would enable investors to acquire exposure to the foremost digital asset without needing to invest directly through the spot market.

The Approval of Spot ETF Options

According to CryptoQuant, it was revealed that the United States Securities and Exchange Commission has given its green light for the debut of asset management giant BlackRock’s iShares Bitcoin Trust (IBIT) on the exchange. This makes IBIT the biggest spot Bitcoin Exchange Traded Fund currently available in the market.

Investment choices known as derivatives offer holders the opportunity to purchase or sell certain cryptocurrencies at a fixed cost and time. By doing so, investors can profit from fluctuations in the market without actually owning the underlying digital currencies.

An IBIT option represents a fresh instrument for investors to safeguard and gamble on fluctuations in Bitcoin prices, symbolizing a significant stride towards increased institutional investment. Experts note that this move underscores the deepening connection between cryptocurrency and conventional finance markets and a burgeoning pattern of regulatory endorsement for Bitcoin-oriented financial services.

A Potential Increase in BTC Paper Supply

2021 has seen unprecedented expansion in Bitcoin options trading on the derivatives platform Chicago Mercantile Exchange (CME). On March 12 alone, this form of investment reached an all-time high open interest value of approximately $500 million – a fivefold increase compared to the peak from the previous year.

It’s interesting to note that unlike investors in the futures market on CME, option traders in the Bitcoin market seem to hold their positions for a longer period. This is because CryptoQuant analysts found that most open options on the CME Bitcoin futures market have expiration dates within one to three months, while there are many contracts with expiration dates of four months or more for options.

In March, when Bitcoin reached a new peak, about 45% of the options contracts, measured by their dollar value, were set to expire within five months or later.

During tough economic times like the one experienced in 2022, Bitcoin investors can profit from price fluctuations without directly owning the digital currency. This is made possible through leveraging options, which essentially allows them to bet on whether the price will rise (long) or fall (short). In the futures market of crypto exchanges, we saw an uptick in open interest, indicating that more investors were shorting Bitcoin. This means that the amount of Bitcoin tied up in these perpetual futures contracts skyrocketed from 279,000 to 549,000 BTC.

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2024-09-29 14:50