TL;DR
- Jeff Park claims that Bitcoin ETF options won’t reduce its volatility.
- Bitcoin’s limited supply influences its price fluctuations.
- ETF options offer more regulated exposure to Bitcoin without stabilizing its value.
Jeff Park, head of alpha strategies at Bitwise Asset Management, argues that the recent approval of Bitcoin ETF options by the SEC will not decrease the inherent volatility of the cryptocurrency.
Although these options provide more tools for investors to access Bitcoin, Park asserts that the limited supply of 21 million Bitcoins will continue to drive significant price fluctuations.
Unlike traditional assets, which can be regulated by central banks to maintain price and supply stability, Bitcoin lacks such mechanisms. This leaves investors facing a rollercoaster of prices without guarantees.
The recent decision by the SEC to allow options trading tied to BlackRock’s iShares Bitcoin Trust (IBIT) has been seen as a pivotal moment for the crypto world.
According to Park, this marks the first time that a limited-supply asset is available with leverage in a regulated environment. However, Park emphasizes that this does not mean Bitcoin’s volatility will decrease.
On the contrary, these options could accelerate synthetic exposure to the asset, increasing opportunities for investors to capture price movements but without eliminating the large swings that have characterized Bitcoin since its inception.
Impact of ETF options on the Bitcoin market
For Park, the fact that ETF options help investors benefit from increased exposure to Bitcoin does not imply a reduction in volatility.
In fact, he points out that when Bitcoin’s spot price rises, so does its implied volatility, creating a scenario known as “negative Vana.”
In this context, when gamma spikes occur, Bitcoin’s price can rise abruptly and rapidly, increasing risk for traders.
Despite these risks, Park acknowledges that ETF options offer a new avenue for investors to participate in the Bitcoin market with lower premium costs.
However, he warns that this will not change the unpredictable nature of the market.
In fact, as demand and exposure to Bitcoin grow, it becomes more likely that price increases will continue, keeping the cryptocurrency as a highly speculative asset.
Finally, Park mentions that while miners play a crucial role in setting the floor for Bitcoin’s price, ETF options allow investors to imagine a ceiling that always seems out of reach, contributing to a continuous cycle of rising expectations and persistent volatility.
