Bitwise CEO Says ‘Things Will Likely Get Crazy’ After Bitcoin Options ETF Launches – Here’s Why

Bitwise CEO Jeff Park believes things are “likely to get hot” now that the U.S. Securities and Exchange Commission (SEC) has approved BlackRock’s Bitcoin (BTC)-backed options ETF.

Last week, the SEC gave the green light to accelerated approval for the listing and trading of options on iShares Bitcoin Trust (IBIT), an ETF from BlackRock.

Park, Bitwise’s head of alpha strategy, says the approval “marks the most monumental advancement possible for the cryptocurrency market,” noting that the options will unlock synthetic leveraged flows for BTC.

He also says Bitcoin has unique volatility characteristics, including a “volatility smile.”

“Bitcoin is unique in that meltdowns happen as often as meltdowns, so the market requires a risk premium on both sides. The practical implications? You can see this in a second-order Greek notation called a vanna. Historically, with call options, as spot increases, implied volatility tends to decrease. So while the option delta increases (becomes more in the money), the rate of increase slows—that’s a positive vanna that creates a kind of resistance.

However, Bitcoin options have a negative vanna: as spot increases, volatility also increases, meaning delta increases even faster. When dealers who are short hedge this gamma (gamma squeeze), the Bitcoin case becomes explosively recursive. More growth leads to even more growth as dealers are forced to buy at higher prices. The negative gamma vanna squeeze acts like a refueling rocket.

Park notes that BTC cannot be diluted, unlike meme stocks whose board can issue new shares.

“In summary, the Bitcoin ETF options market is the first time the financial world has seen regulated leverage on a perpetual commodity that is truly limited in supply. Things are likely to get wild. In such scenarios, regulated markets could shut down.

But the amazing thing about Bitcoin is that there will always be a parallel, decentralized market that cannot be shut down, unlike GME – which, as you can imagine, will only add fuel to the fire.

This is going to be incredibly fantastic.”

Park also says the options will be great for Bitcoin miners.

“Miners help us find the FLOOR. ETF options help us visualize the idea of ​​grabbing the CEILING and missing it every time it goes higher – which in turn helps miners’ profitability and increases safety.”

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