By Omkar Godbole (All times ET unless indicated otherwise)
The U.S.-listed bitcoin (BTC) and ether (ETH) exchange-traded funds (ETFs) that have sucked in billions in institutional money, smoothing out the once-crazy volatility in these tokens, are about to get more powerful.
Trading in options, handy hedging tools tied to the ETFs, is no longer capped by a rule limiting any single participant to no more than 25,000 contracts. Nasdaq filed for the change on Jan. 7, and it went live this week.
Options allow traders to bet on the future price of an asset at a minimal initial cost. For a small fee, they are able to lock in a BTC purchase at a specific price and capitalize on future gains. Put options work in the opposite direction, representing a bailout pass to sell at today's price if the asset plummets in future.
Dropping the cap means big funds and institutions can fully hedge their spot ETF positions and dive in deeper. Options on these ETFs, especially BlackRock's bitcoin ETF, IBIT, already rival the BTC options activity on leading centralized exchanges like Deribit. Without the cap, they could emerge as the clear leader.
These options have already driven down implied volatility turning crypto's wild west into a Wall Street pro league as institutions that write (that is, sell) call options keep hold of the ETF shares. This allows them to collect the premium received for selling the option while maintaining bullish exposure through the spot ETF position.
As for the market action, not much has changed over the past 24 hours. Cryptocurrencies are still underperforming precious metals. Bitcoin, ether (ETH), XRP (XRP), solana (SOL), BNB (BNB) have dropped as much as 2.5%.
Tron's TRX is an outlier, gaining nearly 3%. The upswing follows reports that Tron DAO Ventures invested $8 million in River, a chain-abstraction stablecoin system designed to connect assets, liquidity and yield across ecosystems.
In traditional markets, the Dollar Index, which tracks the greenback's value against fiat currencies, held steady at Tuesday's low of 98.25. The Committee for a Responsible Federal Budget (CRFB) warned that the burgeoning fiscal debt makes some form of crisis inevitable. Stay alert!
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today
For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead".
• Jan. 23: Trump family-linked World Liberty Financial to announce "something massive" entering the WLFI ecosystem.