BlackRock’s iShares Bitcoin Trust (IBIT) made history on Tuesday by launching the first U.S. spot Bitcoin ETF with options. This move gave IBIT a one-day head start over other competitors, which began trading their options later Wednesday.
The IBIT ETF, with a market cap of $44 billion, saw an impressive $2 billion in notional options trading on its first day. Additionally, the ETF itself traded more than $4 billion in volume, ranking it just behind the SPDR S&P 500 ETF (SPY), Invesco QQQ Trust (QQQ), and iShares Russell 2000 ETF (IWM), which have significantly larger market caps, according to Coinglass data.
Eric Balchunas, Senior ETF Analyst at Bloomberg, praised the remarkable performance of IBIT’s options on day one. While IBIT has yet to reach the top ETFs in terms of trading volume, Balchunas anticipates that this will occur in the coming days or weeks. “A $1.9 billion trade volume on day one is unheard of,” Balchunas said. “For context, BITO did $363 million, and that’s been around for four years. And this was with a 25,000 contract position limit. It’s not at the ‘big dog’ level yet, but give it time.”
The 25,000 contract position limit on IBIT options is notably smaller than what’s typical in traditional financial markets. Market participants are restricted to holding or controlling a maximum of 25,000 contracts at any given time. This limitation aims to prevent market manipulation and is a point of contention for some industry experts.
Jeff Park, Head of Alpha Strategies at Bitwise, discussed the perceived unfairness of these limits, noting that the exercisable risk on IBIT options represents less than 0.5% of the ETF’s outstanding shares, far below the industry standard of 7%. In comparison, CME Bitcoin futures are allowed to trade 2,000 contracts, equivalent to 175,000 IBIT contracts. Park believes that the CME Group prefers Bitcoin to be traded mainly as futures rather than options, and he suggests that the CFTC and SEC’s position limits are politically driven to prevent manipulation.
Despite these regulatory constraints, Bitcoin surged to new all-time highs above $94,000 on the same day. Furthermore, Glassnode data revealed that options open interest surpassed $40 billion for the first time, signaling a growing market for Bitcoin options, even though futures open interest still leads at $60 billion.
The launch of spot Bitcoin ETFs has also drawn significant investment, with Farside data reporting a net inflow of $816.4 million into the sector, bringing the total net inflow to $28.5 billion. As the options market continues to evolve, Bitcoin’s role in the financial landscape appears to be expanding rapidly.
