Analysis: The approval of Bitcoin ETF options will increase market volatility in the short term

The U.S. SEC has approved options trading for multiple Bitcoin spot ETFs, and analysts predict this will increase the market volatility of Bitcoin. Kbit CEO Ed Tolson believes that retail investors will use Bitcoin ETF options for speculation, which may amplify price fluctuations. "Retail speculation is likely to be a major use case for BlackRock's IBIT options, with institutional market makers expected to be the other party in these trades. This means they need to buy when prices rise and sell when they fall, which could exacerbate volatility."

Galaxy Digital's Head of Trading Operations Michael Harvey also expects short-term volatility to intensify. "We expect the number of retail traders initially will exceed institutions, which could exacerbate volatility. Over time, as institutions adopt yield-generating strategies such as selling volatility, this might suppress the overall volatility we see today."

Yesterday's news reported that the U.S Securities and Exchange Commission (SEC) approved several Bitcoin ETF option products listed on Cboe exchange and NYSE American exchange. Cboe was granted permission to list Fidelity Wise Origin Bitcoin Fund (FBTC) and ARK 21Shares Bitcoin ETF (ARKB) options; NYSE American was allowed to list Grayscale Bitcoin Trust ETF (GBTC), Grayscale Bitcoin Mini Trust (BTC), and Bitwise Bitcoin ETF (BITB) options. According to documents shown, both exchanges have set a unilateral position limit of 25 thousand contracts per each bitcoin ETF option product lower than other ETF option products.