The Bitcoin price volatility is likely to surge in both directions following the recent approval of options for spot Bitcoin ETFs, according to Jeff Park, head of Alpha Strategies at Bitwise Investments. In an interview with Anthony Pompliano, Park explained how these newly available options differ from existing crypto derivatives and why they could significantly impact the Bitcoin market dynamics. Why Bitcoin ETF Options Are A Game Changer Park outlined a comprehensive thesis in the interview, noting, “Volatility is not just a static measure of past performance; it reflects the distribution of potential outcomes and the severity of those outcomes.” He emphasized that the introduction of Bitcoin ETF options will bring new dimensions to how traders interact with Bitcoin, potentially amplifying both price rises and falls. This volatility, he argued, stems from the unique characteristics of options as financial instruments. Related Reading: Bitcoin’s Puell Multiple Signals A Bullish Surge: Could A New ATH Be Near? While Bitcoin options are not entirely new—offshore platforms like Deribit and LedgerX already offer similar instruments—ETF options introduce a regulated market overseen by US authorities like the CFTC and SEC. This makes a profound difference, according to Park, because “removal of counterparty risk is something that crypto has not fully solved offshore.” He noted that the clearing mechanisms provided by the Options Clearing Corporation (OCC) bring added security to these trades, which institutional investors have long demanded. More importantly, Park highlighted the advantage of cross-collateralization, which is not available on existing platforms that cater exclusively to crypto. “Cross-collateralization allows traders to use non-correlated assets, such as gold ETFs, as collateral in Bitcoin trades,” he explained. This flexibility increases liquidity and efficiency in the market. “You can’t do this on Deribit or any purely crypto-focused platform,” Park emphasized, calling it a “huge unlock” for the Bitcoin derivatives market. Park anticipates that the introduction of these options will magnify Bitcoin’s price swings. “For any well-functioning and liquid market, you need organic buyers and sellers to create natural demand and supply,” he explained. However, the real impact comes from how dealers hedge their positions, especially when they are “short gamma,” a condition where their hedging activities can intensify price movements. In practical terms, Park said, “Dealers who are short gamma must buy more Bitcoin as prices rise and sell more as prices fall, thereby adding to the volatility.” This dynamic is crucial to understanding how ETF options could push Bitcoin’s price to extremes in both directions. He also pointed out that, historically, most Bitcoin options activity has been driven by speculation, rather than risk management strategies like covered calls, which tend to reduce volatility. Related Reading: Here’s Where We Are In The Bitcoin Bull Cycle According To The Wall Street Cheat Sheet One of Park’s key points was the dramatic growth potential for Bitcoin’s derivatives market. In traditional markets like equities, the derivatives market is often 10 times larger than the underlying spot market. In contrast, Bitcoin’s open interest in derivatives currently represents just 3% of its spot market value, according to Park’s figures. “The introduction of ETF options could lead to a 300x increase in Bitcoin’s derivatives market size,” Park predicted. This growth would bring substantial new liquidity but would likely also drive volatility higher, due to the larger volume of speculative trades and the structural leverage introduced by options. “That’s an astronomical number for which there’s going to be new flows and liquidity coming into this market which will likely therefore add volatility,” Park stated. “In the global economy, derivatives markets are far larger than the spot markets,” he added, pointing to the fact that in traditional asset classes like equities and commodities, derivatives play a critical role in risk management and speculation. “Bitcoin is moving toward a similar structure, and that’s where we’ll see the most significant price movements and liquidity,” Park concluded. At press time, BTC traded at $62,334. Featured image from YouTube, chart from TradingView.com
On Friday, crypto asset manager Bitwise, filed with the US Securities and Exchange Commission (SEC) to convert three existing futures-based exchange-traded funds (ETFs) into a new series of funds utilizing “Trendwise strategies” approach. This strategy is expected to rotate investments between cryptocurrencies and US Treasuries based on prevailing market conditions, aiming to optimize returns and […]
With dozens of layer-1 blockchains on the market, communication between networks has become a significant pain point for the broader adoption of Web3-based applications.
XRP holders were on a high after the first XRP ETF application was filed, only to see hopes dim after the SEC’s Ripple appeal. The race is on between Solana and XRP to become the first US altcoin ETF.
Bitwise Asset Management has officially filed for a spot XRP exchange-traded fund (ETF) with Delaware’s Division of Corporations on September 30. The filing encompasses the registration for establishing a Delaware statutory trust, a business-oriented trust recognized under Delaware state law. This strategic move aligns with precedents set by prominent financial entities such as BlackRock and […]
Crypto native asset manager Bitwise is moving toward creating an exchange-traded fund tracking XRP, the token closely associated with crypto company Ripple.
The crypto-focused asset manager confirmed filing the XRP exchange-traded fund trust registration with the state of Delaware.
Bitwise Chief Investment Officer Matt Hougan has recently highlighted a growing trend of top financial advisors “allocating to cryptocurrency” in their portfolios. Speaking at the Barron’s Advisor 100 Summit in Palm Beach, Florida, Hougan shared insights on how some of the “most powerful people” in the financial industry are beginning to embrace digital assets like […]
Ether price could be on track for another correction into a triple-bottom, marking the beginning of a big rally into 2025.
Options would allow institutional investors to hedge risks and traders to amplify their buying power.
This week’s Crypto Biz examines recent acquisitions in the crypto industry, Tether’s plans for a dirham stablecoin, and Polychain’s investment in the Bitcoin protocol Corn.
This week’s Crypto Biz examines recent acquisitions in the crypto industry, Tether’s plans for a dirham stablecoin, and Polychain’s investment in the Bitcoin protocol Corn.
The number of institutional investors holding bitcoin ETFs rose 14% in the second quarter of the year to 1,100, the report said.
The acquisition of ETC Group's $1 billion in assets under management takes Bitwise's AUM above $4.5 billion.
A Grayscale executive said the products will provide traditional investors with exposure to an asset that has the potential to transform the entire financial system.
A Grayscale executive said the products will provide traditional investors with exposure to an asset that has the potential to transform the entire financial system.
The approved spot Ether ETF applicants included BlackRock, Fidelity and Grayscale, and are expected to bring billions of dollars into the ecosystem.
Bitwise Chief Investment Officer Matt Hougan says there are three reasons why Ether ETFs could drive the price of the asset, more than Bitcoin ETFs did for BTC.
BlackRock, Franklin Templeton, and VanEck have reportedly received preliminary approval from the US securities regulator, sources say.
SEC Chair Gary Gensler said that the commission could give final approvals on spot Ether ETFs sometime in summer 2024, while some analysts are predicting as early as July.
Asset management firm Bitwise has disclosed Pantera is interested in buying its upcoming spot Ether ETF, but it could spend more, less — or nothing at all.
Bitwise Chief Investment Officer Matt Hougan released a compelling investor memo titled “Washington Awakens: This Is What Alpha Looks Like,” predicting a monumental shift in the crypto market influenced by changing regulatory landscapes, potentially surpassing the impact of BlackRock’s foray into Bitcoin and altcoins. This Crypto Development Is Bigger Than BlackRock In his memo, Hougan […]
Regulatory uncertainty is holding back the $20 trillion dollar financial advisory industry from investing more in crypto, claims Bitwise investment head Matt Hougan.
Spot Ether ETFs might be weeks or months away from debuting on exchanges, as the ETF filers have yet to receive their S-1 SEC registration.
In a recently published report by Bitwise, the leading crypto index fund manager, a striking comparison has been drawn between Coinbase and Amazon, highlighting a significant yet under-reported aspect of Coinbase’s business — the Base Layer 2 network. Titled “It’s All About That Base (and Other Thoughts on Coinbase),” the report authored by Matt Hougan and Juan Leon delves deep into the financial and strategic shifts underpinning Coinbase’s latest successes and potential future. Amazon Of Crypto? Bitwise Projects Stellar Future For Coinbase Coinbase’s latest financial results have been a revelation, demonstrating robust growth and operational efficiency. The company reported $1.6 billion in net revenue, marking a 116% increase year-over-year, significantly surpassing Wall Street’s expectation of $1.36 billion. Profits were equally impressive, reaching $1.2 billion with total cash reserves swelling to $7.1 billion. Each of Coinbase’s business lines showed notable growth: consumer trading revenue rose by 93%, institutional trading by 105%, stablecoin revenue by 15%, blockchain rewards by 59%, and custodial services by 64%. Related Reading: Coinbase Sees Largest USDC Inflow Ever, What This Could Mean For Bitcoin Despite these strong numbers, the stock has trended downwards, suggesting that the market may not fully appreciate the depth of the company’s strengths. However, Bitwise highlights a less conspicuous but potentially transformative element of Coinbase’s portfolio: the Base Layer 2 network. Launched in August atop Ethereum, Base aims to enhance the blockchain’s throughput while lowering costs. It operates similarly to a bar tab, aggregating transactions and settling them in batches, thereby reducing transaction costs to under $0.01 and speeding up processing times to less than one second. The adoption rate of Base has been staggering. The network saw a 74% increase in transactions quarter-over-quarter in the first quarter, with a 40% increase in April alone compared to the entire first quarter. The exponential growth in the number of developers using Base, which increased eightfold, underscores the network’s rising significance and the broader industry’s interest. From a financial perspective, Base has been lucrative for Coinbase. In the first quarter alone, the network generated $27.4 million in transaction fees, of which Coinbase retained $15.5 million. This high-margin revenue stream continued into April, adding another $11 million to Coinbase’s profits. Given these trends, Bitwise predicts that Base could soon be contributing $10 million to $20 million in monthly profits to Coinbase. The analogy with Amazon is rooted in the transformation potential of Base. Just as Amazon evolved from a simple online bookstore into a retail giant and later a dominant force in cloud computing through Amazon Web Services (AWS), Coinbase could similarly evolve from a crypto brokerage to a fundamental infrastructure provider for the crypto industry. Related Reading: Bitcoin Coinbase Premium Returns To Neutral: Buying Push Already Over? This shift could redefine Coinbase’s role and impact within the market, positioning it as a central infrastructure entity in the crypto ecosystem, akin to how AWS underpins much of today’s web services. The report concludes by reflecting on the significance of Base for Coinbase’s strategic direction. “[T]he early returns on Base suggest that Coinbase could end up becoming something even greater: a core infrastructure provider to the crypto ecosystem. And that would be a very big deal indeed.” COIN Price Analysis Analyzing the technical landscape, the price of Coinbase (COIN) currently faces a pivotal moment. After dropping to $211.20 (as of press time), down 11.4% from a weekly high of $235.79, the stock is testing significant resistance and support levels that could dictate its short-term trajectory. The Fibonacci retracement tool, applied from a low of $31.62 to a high of $429.52, identifies critical price points. Presently, COIN is contending with the $230.57 level (0.5 Fibonacci level), which acts as the primary resistance. The 20-week Exponential Moving Average (EMA) provides crucial support at $199.35, with the stock recently bouncing off this level. The Relative Strength Index (RSI) stands at 56.10, suggesting a balanced dynamic between buying and selling pressures, with a slight tilt towards buying. The recent price behavior, characterized by a candlestick with a small body and longer wicks, reflects the ongoing uncertainty and cautious sentiment among traders. Featured image from Nasdaq, chart from TradingView.com
Many expect the commission to reach a final decision on spot Ether ETFs in May with approval or denial of a filing from VanEck.
Bitwise chief investment officer Matt Hougan cautions that not every token having a price surge in the cryptocurrency market “deserves to be.”
The ten spot bitcoin ETFs have arguably had one of the most successful launches in history with trading volume and inflows reaching new highs this week, but Bitwise Chief Investment Officer Matt Hougan expects even more demand is on the way.
Physically backed Bitcoin ETFs, like Bitwise Bitcoin ETF, are safer than any other ETFs due to their unique accounting system, Core Scientific founder Darin Feinstein believes.
The asset management firm pledged public transparency following the U.S. Securities and Exchange Commission approving the listing of its spot Bitcoin exchange-traded fund.