Since its launch, BlackRock’s spot bitcoin ETF has gained significant traction, drawing in billions from investors who want exposure to cryptocurrency without dealing with crypto wallets or exchanges. Traders and analysts closely monitor the fund’s inflows to understand institutional market positioning.
Recently, attention has shifted to options linked to the ETF following a surge in activity during Thursday’s market downturn. Some analysts attributed this spike to a hedge fund fallout, while others suggested it was merely routine market volatility.
Key Highlights
On Friday, as the ETF plunged 13% to its lowest point since October 2024, options trading surged to a record 2.33 million contracts, with put options slightly outpacing call options. The increased volume of puts signifies a higher demand for protection against potential losses, common during sell-offs.
Options are financial instruments that serve as insurance against price fluctuations of the underlying asset, in this case, IBIT. Investors pay a premium for the right, but not the obligation, to buy or sell IBIT at a predetermined price before a specified deadline.
Speculative Insights: Hedge Fund Fallout
A viral post by market analyst Parker suggests that the $900 million in premiums paid by IBIT options buyers resulted from the collapse of a hedge fund heavily invested in IBIT. This fund had reportedly purchased “out of the money” call options expecting a swift market recovery after an October downturn.
As the market dropped, this hedge fund doubled down on its positions by purchasing more options with borrowed funds. Following the decline of IBIT, the fund faced margin calls and was forced to liquidate a large volume of its IBIT holdings, contributing to a record $10 billion in spot volume.
Expert Opinions and Alternative Views
However, Tony Stewart, founder of Pelion Capital, believes that while IBIT options may have contributed to market turbulence, they are not solely responsible for the price drop or the spike in trading activity. He notes that a significant portion of the premiums was likely due to traders buying back put options to mitigate risks as IBIT’s value dropped.
Whether linked to a hedge fund collapse or simply market noise, this situation underscores the growing influence of IBIT options. Traders may benefit from monitoring these options similarly to how they analyze ETF inflows, given their potential impact on the broader market.
