The introduction of options for the $43 billion iShares Bitcoin Trust (IBIT) product will reduce Bitcoin’s volatility and attract a broader investor base, according to Alex Thorn, head of firmwide research at Galaxy Digital.
Speaking to Bloomberg Television, Thorn explained the long-term benefits of the new financial product for the cryptocurrency market.
Thorn commented on the situation in his statement:
“As Bitcoin becomes more widely held, volatility will decrease. Options will help reduce volatility, and as volatility decreases, people will be able to take larger positions.”
The availability of options could change the perception of Bitcoin from a high-risk speculative asset to one with broader, fundamental uses, he added.
The launch of Bitcoin ETF options by Nasdaq is expected to provide institutions with better tools to hedge their positions and increase liquidity in the market. Thorn also noted that reduced volatility could lead to more retail participation during bull markets.
While options are expected to moderate Bitcoin’s price movements, Thorn warned that the crypto industry will need to address the growing involvement of traditional finance firms. “The crypto industry will also have to figure out how to maintain control as traditional finance enters the space,” he said.
Bitcoin has had a remarkable year, more than doubling in value and reaching an all-time high of $94,000 today. While volatility has historically attracted investors to the asset, Thorn believes the introduction of ETF options will create a more balanced market in the long term.
*This is not investment advice.