Over the years, Bitcoin Win out of boredom.
There’s not much investors can do with it other than buy it and hold it. But that’s exactly what makes the world’s largest cryptocurrency valuable.
It is a commodity, just like gold or corn. It’s not too fancy with its products. In fact, Bitcoin’s core development team intentionally handles everything involving the underlying blockchain as slowly as possible to avoid breaking things. This is why many of crypto’s more liberal coders head to other blockchains to tinker and do things like build decentralized applications.
This approach worked. Traders put their money into Bitcoin not just because it is the OG coin, but because the network is strong and reliable, and they know what they are getting. as Solana After reporting a hack hackerBitcoin hasn’t really changed. The asset is highly volatile, but aside from a major system upgrade that took four years to design and approve, Bitcoin has maintained its status as the world’s largest cryptocurrency by market capitalization by sticking to the status quo.
But times are changing for the original coin.
Developers are increasingly building on Bitcoin’s underlying blockchain in unexpected ways. Wall Street has also decked out the coin with all the familiar trappings, like an exchange-traded fund wrapper and allowing traders to hedge positions and make leveraged bets.
In January, a spot Bitcoin ETF began trading, opening the door to more mainstream investors. Last week, options for these spot crypto products finally started going live on the Nasdaq and New York Stock Exchange. CBOE Global Markets will also list the first cash-settled Bitcoin ETF option on December 2.
The creation of this new margin framework around Bitcoin means that both retail traders and institutions will be able to gain greater exposure to the asset class relative to the amount of cash they invest.
A new way to bet on Bitcoin
Overall, U.S.-issued spot Bitcoin funds have more than $100 billion in assets under management. Last week, they recorded their largest ever weekly inflows, totaling more than $3.1 billion. Net flows so far this year are as high as $37 billion, according to CoinShares, while the U.S. gold ETF attracted about $309 million in its first year.
Nearly half of the inflows into spot Bitcoin products occurred in the wake of U.S. interest rate cuts. September was the first in four years.
Vetle Lunde, director of research at K33 Research, told CNBC that futures open interest on the CME Derivatives exchange, which is how most U.S. institutions currently purchase Bitcoin futures contracts, hit an all-time high. But many traders have been waiting for spot Bitcoin ETF options on major exchanges such as the New York Stock Exchange and Nasdaq because it could enhance liquidity and provide hedging tools.
Lunde said demand for leveraged long exposure to Bitcoin and Ethereum is climbing, with VolatilityShares’ BTC exposure hitting an all-time high.
Galaxy Digital’s trading team told CNBC that the firm observed heavy trading volume in options on the BlackRock IBIT ETF, the first option launched on Nasdaq last week. BlackRock surpassed Grayscale in August to become the world’s largest digital asset manager. BlackRock’s Bitcoin Trust IBIT holds $48.4 billion in Bitcoin, while its gold trust holds $34 billion in Bitcoin.
The IBIT option made a splash on its debut, with first-day trading volume of 353,716 contracts, according to Galaxy Digital. The firm noted that the previous most active debut in option trading was in 2012 when the Facebook option went live, when 360,000 contracts changed hands.
Galaxy expects significant trading activity to continue until January 2027, roughly the middle of the Donald Trump administration. During the campaign, the president-elect’s attitude towards Bitcoin underwent a 180-degree turn, from criticizing the digital asset to making major commitments to the crypto industry. Bitcoin is up about 40% since Election Day on November 5.
Galaxy’s trading team told CNBC: “This concentrated, long-term level of activity reflects investor confidence in the ETF’s long-term growth potential and bodes well for bullish sentiment in the coming years.”
Until now, offshore crypto-native platforms such as Binance and Deribit have been the main markets for Bitcoin derivatives trading. Galaxy told CNBC that there is a clear volatility premium between Deribit, CME and IBIT, which may provide arbitrage opportunities between different platforms that offer derivatives trading.
More than $9 billion in Bitcoin options contracts expired on Deribit on Friday, which could lead to greater price volatility as the expiration date approaches.
“There’s a lot of leverage in the system right now,” Mike Novogratz, CEO of Galaxy Digital and a long-time cryptocurrency investor, told CNBC’s “Squawk Box” on Friday.
“You look at the funding rates for cryptocurrencies in our market, right? The perpetual market, although they have been high, the fundamentals are also high,” Novogratz said. “The crypto community is leveraged, so there will be a correction.”
Bitcoin prices were close to $100,000 on Friday, but retreated over the weekend. The cryptocurrency is currently trading at around $95,000.
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