Bitcoin did well for years by being uninteresting.
Other than buying and holding it, investors couldn’t do anything with it. However, that was the exact reason the biggest cryptocurrency in the world was worth so much.
Similar to maize or gold, it was a commodity. Its offers weren’t particularly elaborate. To prevent anything from breaking, the core team of engineers for Bitcoin has really worked as slowly as possible on everything that interacts with the base blockchain. For this reason, a large number of cryptocurrency’s more casual programmers moved to other blockchains to experiment and create decentralized apps.
The strategy was successful. In addition to being the original coin, traders poured money into bitcoin since they knew what they were getting and the network was stable and dependable. According to reports of hack after hack, Bitcoin remained largely unchanged. Despite its volatility, Bitcoin maintained its position as the largest cryptocurrency by market capitalization by maintaining the status quo, with the exception of a significant system upgrade that took four years to build and approve.
For the original coin, however, things are changing.
More and more developers are creating unanticipated additions to the foundational blockchain of Bitcoin. Additionally, Wall Street is showcasing the coin with all of its well-known features, including exchange-traded fund wrappers and the ability for traders to make leveraged bets and hedge positions.
When spot bitcoin ETFs started trading in January, more mainstream investors were able to participate. Finally, last week, the Nasdaq and New York Stock Exchange began to provide options on such spot cryptocurrency contracts. The first cash-settled bitcoin ETF options will be listed by CBOE Global Markets on December 2.
By developing this new margin structure around bitcoin, institutions and individual traders will be able to increase their exposure to the asset class in relation to their investment amount.
New ways to bet on bitcoin
The combined assets under management of the U.S.-issued spot bitcoin funds exceed $100 billion. They recorded its biggest weekly inflows ever last week, at almost $3.1 billion. In contrast to U.S. Gold ETFs, which attracted about $309 million in their first year, year-to-date net flows have reached $37 billion, according to CoinShares.
Following the first rate drop in four years in September, over half of those inflows into spot bitcoin products occurred.
The head of research at K33 Research, Vetle Lunde, told CNBC that the CME derivatives exchange, where the majority of U.S. institutions presently purchase bitcoin futures contracts, has seen record-high open interest in futures. However, because it improves liquidity and provides hedging tools, many traders have been waiting for options on spot bitcoin ETFs on major exchanges like the NYSE and Nasdaq.
According to Lunde, the demand for leveraged long exposure to ether and bitcoin is increasing, as seen by VolatilityShares’ BTC exposure reaching all-time highs.
BlackRock’s IBIT ETF options, the first to debut on the Nasdaq last week, have seen substantial volume, Galaxy Digital’s trading team told CNBC. In August, BlackRock surpassed Grayscale to become the world’s largest digital asset management. In contrast to its $34 billion gold trust, BlackRock’s bitcoin trust IBIT has $48.4 billion in bitcoin.
According to Galaxy Digital, IBIT’s first day saw 353,716 contracts traded, making it a huge start for options. The company pointed out that 360,000 contracts were exchanged at Facebook’s 2012 options launch, which was the most active start to options trading.
Notable trading behavior is observed by Galaxy through January 2027, which is almost halfway into Donald Trump’s presidency. The president-elect reversed course on bitcoin over the campaign trail, going from decrying digital assets to promising the cryptocurrency industry tremendous things. Since Election Day on November 5, Bitcoin has increased by about 40%.
According to Galaxy’s trading team, this degree of concentrated, long-dated activity indicates bullish sentiment for the upcoming years and shows investor trust in the ETF’s long-term growth potential, CNBC said.
Up until recently, the primary marketplace for trading bitcoin futures has been offshore crypto native platforms like Binance and Deribit. Galaxy informed CNBC that there is a discernible volatility premium between Deribit, CME, and IBIT, which may create opportunities for arbitrage between the many platforms that offer trading for derivatives.
Bitcoin futures contracts worth over $9 billion are set to expire on Deribit on Friday; as the expiration date draws nearer, there may be further market volatility.
Longtime cryptocurrency investor and Galaxy Digital CEO Mike Novogratz told CNBC’s Squawk Box on Friday that there is a lot of leverage in the system at the moment.
To do cryptocurrency in our market, you check the funding rates, correct? Novogratz stated that the base is high in the perpetual market, which is as high as it has been. There will be a correction because the crypto community is in dire straits.
On Friday, Bitcoin was quite close to $100,000, but it fell during the weekend. At the moment, the cryptocurrency is going for about $95,000.
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