Nasdaq wants to let Bitcoin options run wild

Recently, Nasdaq's International Securities Exchange (ISE) has recognized a surge in interest for Bitcoin options. In a regulatory filing, the ISE proposed to raise the trading limit for BlackRock’s iShares Bitcoin Trust ETF (IBIT) from 250,000 contracts to an impressive 1 million. This marks Nasdaq's second request for an increase in trading caps this year, having previously elevated the limit tenfold just a few months ago. The exchange argues that this increase is essential to accommodate the growing institutional appetite for IBIT options and to support legitimate trading strategies.

Nasdaq increases Bitcoin options trading limits to meet demand

The proposed increase in trading limits highlights Nasdaq's commitment to adapting to market dynamics. As Bitcoin continues to gain traction among institutional investors, the demand for options trading is on the rise. By allowing more contracts to be traded, Nasdaq aims to ensure that investors can engage in hedging and risk management strategies effectively.

Comparison with Deribit shows growing competition in options trading

At the same time, the competition in the options trading market is heating up. In October, IBIT’s options open interest reached an astounding $50 billion. In contrast, Deribit, a leading crypto-options exchange, reported that its Bitcoin options open interest recently set a new record of approximately $50.27 billion, with around 453,820 active BTC contracts. Deribit has seen a significant increase in trading volume, nearly doubling in 2024 with a total surpassing $1.185 trillion, where options alone accounted for about $743 billion.

Institutional demand is driving major changes in Bitcoin options

Despite the rise of regulated alternatives like IBIT options, Deribit continues to dominate the global Bitcoin options market. However, IBIT options have started to make a significant mark, now responsible for nearly 98% of Bitcoin ETF options trading. This shift indicates that institutional investors are beginning to favor regulated options as they seek to engage in the cryptocurrency market more legitimately.

SEC is considering the new trading cap for Bitcoin options

The U.S. Securities and Exchange Commission (SEC) is currently reviewing Nasdaq's request to increase the trading cap for Bitcoin options. Given the current trends and institutional interest, many analysts believe that the SEC might soon allow Bitcoin trading to expand further. This potential approval could lead to increased liquidity and a more robust market for Bitcoin options, benefiting both investors and the broader financial landscape.

As the cryptocurrency market evolves, Nasdaq's initiatives reflect a significant shift towards accommodating institutional investors, suggesting a promising future for Bitcoin options trading.