For years, bitcoin won by being boring.
Investors could do little with it besides buy and hold. But that simplicity was exactly why the world’s largest cryptocurrency was valuable.
Bitcoin functioned as a commodity, like gold or corn. It didn’t offer anything too fancy. In fact, its core development team intentionally moved slowly on everything related to the base blockchain to avoid breaking things. As a result, many of crypto’s more experimental developers turned to other blockchains to tinker and build decentralized applications. This approach worked. Traders invested in bitcoin not only because it was the original coin but also because the network was robust and reliable, and they knew what to expect. While Solana experienced repeated hacks, bitcoin remained unchanged. The asset remained volatile, but aside from a major system upgrade that took four years to design and approve, bitcoin preserved its position as the world’s largest cryptocurrency by market cap by sticking to the status quo.
But now, times are changing for the original coin.
Developers are increasingly finding new ways to build on bitcoin’s base blockchain. Wall Street is also dressing up the coin with familiar tools, such as exchange-traded fund wrappers, and allowing traders to hedge positions and make leveraged bets. In January, spot bitcoin ETFs began trading, which opened the door to more mainstream investors. Last week, options on those spot crypto products finally launched on the Nasdaq and New York Stock Exchange. CBOE Global Markets is set to list its first cash-settled bitcoin ETF options on December 2.
By creating this new margin framework around bitcoin, both retail traders and institutions will gain more exposure to the asset class relative to the amount of cash they invest.
New Ways to Invest in Bitcoin
U.S.-issued spot bitcoin funds collectively hold more than $100 billion in assets under management. Last week, they recorded their largest weekly inflows on record, totaling over $3.1 billion. According to CoinShares, year-to-date net flows have reached $37 billion, compared to U.S. Gold ETFs, which attracted around $309 million in their first year.
Nearly half of the inflows into spot bitcoin products occurred after the U.S. cut interest rates for the first time in four years in September.
Vetle Lunde, head of research at K33 Research, told CNBC that open interest for futures on the CME derivatives exchange has reached record highs, as most U.S. institutions currently buy bitcoin futures contracts this way. However, many traders have been waiting for options on spot bitcoin ETFs on major exchanges like the NYSE and Nasdaq, as these options enhance liquidity and provide hedging tools.
Lunde also noted that demand for leveraged long exposure to bitcoin and ether is rising, with VolatilityShares’ BTC exposure hitting new all-time highs.
Galaxy Digital’s trading team told CNBC that the firm has observed significant volume in BlackRock’s IBIT ETF options, which launched on the Nasdaq last week. BlackRock, the world’s largest digital asset manager after surpassing Grayscale in August, holds $48.4 billion in bitcoin through its IBIT bitcoin trust, compared to $34 billion in its gold trust.
IBIT options had a blockbuster debut, with 353,716 contracts traded on its first day, according to Galaxy Digital. The firm highlighted that the most active debut for options trading before this was in 2012 when Facebook options went live, with 360,000 contracts changing hands.
Galaxy noted significant trading activity extending to January 2027, roughly halfway into Donald Trump’s administration. During his campaign, the president-elect reversed his stance on bitcoin, shifting from criticism to making bold promises for the crypto industry. Bitcoin has risen about 40% since Election Day on November 5.
“This level of concentrated, long-dated activity reflects investor confidence in the ETF’s long-term growth potential, signaling bullish sentiment for the years ahead,” Galaxy’s trading team told CNBC.
Until now, offshore crypto-native platforms like Binance and Deribit have dominated bitcoin derivatives trading. Galaxy pointed out a noticeable volatility premium between Deribit, CME, and IBIT, creating potential arbitrage opportunities among these platforms.
On Friday, more than $9 billion in bitcoin options contracts will expire on Deribit, which could trigger greater price volatility as the expiration date approaches.
“There’s a ton of leverage in the system right now,” Mike Novogratz, CEO of Galaxy Digital and a longtime crypto investor, told CNBC’s Squawk Box on Friday.
“You look at the funding rates to do crypto in our market, right? The perpetual market, as high as they’ve been, the basis is high,” Novogratz said. “The crypto community is levered to the gills, and so there will be a correction.”
Bitcoin was nearing $100,000 on Friday but retraced over the weekend, currently trading around $95,000.
