BlackRock Poised to Expand Bitcoin ETF Lead After SEC Approves Options Trading

The U.S. Securities and Exchange Commission recently introduced a key change affecting Bitcoin ETFs, raising the cap on the number of options contracts allowed for most funds in this category. According to crypto financial services firm NYDIG, this adjustment could give BlackRock’s iShares Bitcoin Trust (IBIT) an even stronger lead in the market.

SEC Adjusts Rules for Bitcoin Options

On July 29, the SEC approved a tenfold increase in options position limits. The number of contracts permitted jumped from 25,000 to 250,000. This applies to all exchange-traded funds (ETFs) with listed options, with the exception of Fidelity’s Wise Origin Bitcoin Fund (FBTC), which was not included in the expanded limit. 

Greg Cipolaro, NYDIG’s head of research, explained that this adjustment will probably increase IBIT’s dominant advantage over other funds. Meanwhile, it may also hamper FBTC’s standing as the runner-up in options market activity. He stated:

The change is likely to widen the monstrous lead that IBIT already has over the other players, while it hobbles FBTC’s position as the second-largest options player.

Increased Limits Poise BlackRock ETF for Further Expansion

BlackRock’s Bitcoin ETF has already experienced record-breaking growth. In June, Bitcoin Archive reported that IBIT surpassed the $70 billion mark faster than any ETF in history, including those tied to gold. As of August 4, it ranked as the second-best ETF in terms of monthly capital inflows, reflecting strong demand.

Data from CoinGlass shows that IBIT now holds around $85.50 billion in assets under management (AUM), making it roughly four times the size of FBTC, which manages about $21.35 billion. The increased contract limits are expected to fuel further growth by enabling larger and more flexible trading strategies within the fund.

Greg Cipolaro explained that the increased limit is likely to further reduce Bitcoin’s price volatility. While its fluctuations have already been easing, he added that Bitcoin still attracts traders who seek to benefit from price movements, particularly as volatility in traditional markets has continued to shrink.

Expanded ETF Rules May Boost Spot Demand and Market Structure

The broader effect of this rule change may extend beyond trading activity. Cipolaro pointed out that while these strategies might slightly reduce potential returns for option sellers, they could also attract more institutional investors. Lower price swings often appeal to firms seeking balanced exposure, and Bitcoin’s recent trend toward reduced volatility adds to that appeal.

He added that as Bitcoin becomes less unpredictable, it becomes more suitable for long-term portfolios focused on stable risk allocation. This shift could draw in fresh capital and boost spot demand, as more investors seek direct exposure through traditional markets.

The SEC’s July 29 decision was part of a broader set of ETF-related approvals, which included:

• Approved in-kind creation and redemption to make moving assets in and out of ETFs faster and more efficient.
• Gave the go-ahead for FLEX options, allowing funds to customize contracts to suit different investor needs.
• Cleared the way for options trading on the HODL ETF, marking its first-ever approval for such activity.
• Approved Bitwise’s request to list and trade its combined Bitcoin and Ethereum ETF on regulated exchanges.

Cipolaro believes these moves will reshape how traders interact with crypto-related ETFs. He sees them as steps that could broaden access and improve the overall framework of the market.

These long-anticipated moves, some sought by fund sponsors since before the initial bitcoin ETF approvals, will likely have important impacts on market structure and investor access.

Greg Cipolaro

Spot ETF Flows Reveal Changing Trends Amid Growing Institutional Activity

Despite the increased contract limits and growing institutional interest, investor activity has been mixed. According to Wu Blockchain, spot Bitcoin ETFs recorded net outflows totaling $643 million between July 28 and August 1, breaking a seven-week streak of inflows.

Meanwhile, spot Ethereum ETFs drew in $154 million during the same period, marking their twelfth consecutive week of positive inflows. This suggests a possible shift in investor interest toward Ethereum funds. However, the rise in options trading capacity could attract more institutional investors back to Bitcoin.