August 4, 2025
5 min read
Jesse Coghlan
The SEC's 10-fold increase in options contract limits will strengthen BlackRock's Bitcoin ETF dominance and reduce BTC volatility, says NYDIG.
BlackRock Bitcoin ETF to Gain ‘Monstrous Lead’ After SEC Boosts Options Limits
BlackRock’s market-leading spot Bitcoin exchange-traded fund (ETF) is poised to expand its dominance following the U.S. Securities and Exchange Commission’s (SEC) decision to increase position limits for options contracts on Bitcoin ETFs. According to Greg Cipolaro, global head of research at crypto financial services firm NYDIG, the SEC raised the allowed number of options contracts from 25,000 to 250,000 for all ETFs with options. This change includes BlackRock’s iShares Bitcoin Trust ETF (IBIT) but excludes the Fidelity Wise Origin Bitcoin Fund (FBTC).“The change is likely to widen the monstrous lead that IBIT already has over the other players, while it hobbles FBTC’s position as the second-largest options player,” Cipolaro said.IBIT currently manages $85.5 billion in assets, which is four times the $21.35 billion held by FBTC, the second-largest Bitcoin ETF by assets, according to CoinGlass.
Options Limit Raise to Smooth Volatility
Cipolaro explained that the SEC’s decision to increase options position limits will likely suppress Bitcoin’s volatility and stimulate more spot demand.“This change enables more aggressive implementation of options strategies, like covered call selling,” he said. Covered call selling involves traders selling a call option while owning the underlying asset, limiting downside risk but also capping potential gains.Less volatility makes Bitcoin more attractive on a risk-parity basis, potentially drawing new institutional capital seeking balanced risk exposure.
“The feedback loop of falling volatility leading to increased spot buying could become a powerful driver of sustained demand,” Cipolaro added.
SEC Approvals to Impact Market Structure
On the same day, the SEC approved several ETF-related regulatory changes, notably allowing in-kind creation and redemption for crypto ETFs. This permits the exchange of ETF shares for the underlying cryptocurrency rather than cash. Cipolaro described this as a “key feature” ETF issuers had sought before approval, expecting it to significantly impact market structure and investor access. However, he noted that Authorized Participants (APs)—financial institutions responsible for creating and redeeming ETF shares—without crypto trading capabilities may struggle to engage in arbitrage and offer competitive pricing.“There are only two APs today, Jane Street and Virtu, that also have corresponding crypto entities that can trade both sides of the trade,” Cipolaro said. “We expect broker-dealers (APs) that don’t have crypto capabilities to acquire or partner to keep up.”
Source: Cointelegraph, published on August 4, 2025.