Key Takeaways:
SEC raises Bitcoin ETF options contract limit from 25,000 to 250,000.
BlackRock’s iShares Bitcoin Trust (IBIT) stands to benefit most, per NYDIG.
IBIT manages $85.5B in assets — over 4x larger than Fidelity’s FBTC.
Expanded options strategies could reduce volatility and increase spot demand.
SEC also approved in-kind redemption for crypto ETFs, reshaping market structure.
BlackRock’s iShares Bitcoin Trust (IBIT) is expected to widen its lead as the dominant Bitcoin exchange-traded fund following a significant rule change by the U.S. Securities and Exchange Commission (SEC).
According to a research note by Greg Cipolaro, Global Head of Research at NYDIG, the SEC this week raised the options position limit for ETFs from 25,000 to 250,000 contracts — a tenfold increase that applies to all ETFs offering options, including IBIT but not Fidelity’s FBTC, the second-largest Bitcoin ETF.
“The change is likely to widen the monstrous lead that IBIT already has over the other players,” Cipolaro said.
IBIT Already Dominates the Bitcoin ETF Market
IBIT currently manages $85.5 billion in assets, more than four times the $21.35 billion under management by Fidelity’s FBTC, according to data from CoinGlass. The sharp contrast in assets under management (AUM) could deepen now that IBIT can offer significantly larger options exposure.
Higher Limits Enable Advanced Options Strategies
Cipolaro emphasized that the SEC’s move will likely lead to reduced volatility and increased spot Bitcoin demand. Larger options capacity allows institutional investors to pursue covered call strategies, which can stabilize portfolio risk and attract inflows from risk-parity–focused funds.
“Less volatility makes Bitcoin appealing on a risk-parity basis, potentially drawing in new capital,” Cipolaro explained.
Bitcoin's volatility has already been trending lower over the past 12 months, and this shift may amplify that trend further, creating a feedback loop that boosts spot demand.
SEC’s In-Kind Approval Changes Market Structure
The SEC’s ETF approvals this week also included the green light for in-kind creation and redemption, allowing the exchange of ETF shares for the underlying crypto assets instead of cash. This move addresses a longstanding request from ETF issuers and could reshape crypto ETF market dynamics.
“It’s a key feature issuers had wanted,” Cipolaro noted, adding that Authorized Participants (APs) without crypto infrastructure may now find themselves at a disadvantage.
Currently, only Jane Street and Virtu have crypto-capable affiliates able to execute both sides of in-kind redemptions. Other broker-dealers may need to partner or acquire crypto capabilities to remain competitive.
Institutional Edge Widens for IBIT
As the regulatory framework matures and technical limits expand, BlackRock’s IBIT is poised to solidify its dominance in the Bitcoin ETF space. With expanded options limits and favorable structural changes, IBIT may not only lead in AUM but also in liquidity, volatility control, and institutional adoption.
