The introduction of options trading on the iShares Bitcoin Trust, the leading Bitcoin ETF with $43 billion in assets, is poised to reduce Bitcoin’s volatility and broaden its investor base, according to Alex Thorn, Head of Firmwide Research at Galaxy Digital.
Speaking on Bloomberg Television on Tuesday, Thorn explained that wider adoption of Bitcoin, facilitated by options trading, will contribute to decreased volatility. “Over time, as it’s more widely held, volatility will decrease,” Thorn stated. “Options will help dampen volatility, and as volatility comes down, people can take larger position sizes.”
Nasdaq launched options trading for the iShares Bitcoin Trust on Tuesday, marking a significant development for the cryptocurrency market. Thorn believes that reduced volatility will encourage investors to focus on Bitcoin’s fundamental use cases rather than viewing it solely as a high-risk, speculative investment.
The availability of options contracts will enable institutional investors to hedge their Bitcoin exposure more effectively, further enhancing market liquidity. Thorn also anticipates an impact on retail trading, particularly during bull markets. However, he cautioned that the cryptocurrency industry will need to navigate the challenges of maintaining control as traditional finance increasingly enters the space.
While Thorn predicts that options will ultimately contribute to lower Bitcoin volatility in the long run, he acknowledged the role volatility plays in attracting certain investors. Bitcoin’s price has more than doubled this year, reaching a new all-time high of nearly $94,000 on Tuesday, demonstrating the cryptocurrency’s continued appeal despite its price swings.
