Bitcoin’s Trademark Volatility may be on a new phase thanks to Securities and Exchange Commission (SEK).
The agency’s decision to raise position limits for options for most Bitcoin ETFs can help even price fluctuations by encouraging strategies such as covered call sales that throw up in exchange for stable income, according to new research.
This increase in position boundaries for Option Trade on Ibit came when the regulator approved redemptions in the wild to Spot Bitcoin ETFs.
By letting dealers have ten times more contracts than before, wrote newly wrote, SEC has opened the door to more aggressive and sustained opportunity activity. Covered call strategies work especially best in scale.
They are designed to earn the yield from existing holdings by selling exposure upside down, which can of course suppress price movement if done across large portfolios.
Bitcoin’s volatility has already been on a decline, with Deribit’s BTC Volatility Index (DVOL), showing a stable fall from about 90 to 38 in the last four years.
It still appears compared to bonds, shares and other traditional assets. This makes it a tempting target for investors trying to collect income from market fluctuations, effectively reaping volatility, but also risky for institutions that require stable exposures.
“As volatility falls, the asset becomes more investable for institutional portfolios seeking balanced risk exposure. This dynamic could strengthen Spot demand,” wrote Nydig’s analysts.
Ray Dalio, one of the earliest masters for such risk parity strategies, recently suggested a 15% allocation to gold and crypto in the midst of rising debt levels.
“Feedback -loopen of declining volatility leading to increased spot purchases could become a strong driving force for sustained demand,” the company concluded.
Read more: Wall Street has claimed Bitcoin – now what?
