BlackRock’s Bitcoin ETF Poised to Lead Market as SEC Increases Limits

Key Takeaways:

• SEC increases Bitcoin ETF options contract to 250,000, favoring BlackRock’s IBIT.
• Analysts believe the new rule could open up access, as the Bitcoin volatility index hit 37.77.
• In-kind crypto ETF redemptions now allow direct swaps for crypto instead of cash, improving efficiency.

BlackRock’s Bitcoin ETF is set to strengthen its dominant position if a key move by the U.S. Securities and Exchange Commission (SEC) goes according to plan. 

On July 30, the SEC raised the position limit for options tied to Bitcoin ETFs from 25,000 to 250,000 contracts, a tenfold increase that directly benefits funds like BlackRock’s iShares Bitcoin Trust (IBIT). 

Yet, the SEC's update isn't universal. A NYDIG report from August 1 revealed that Fidelity’s Wise Origin Bitcoin Fund (FBTC) was excluded from the expanded limits, leaving it at a competitive disadvantage. 

🚨 Big news: SEC just approved a huge 10x boost in options position limits for BTC ETFs like IBIT and GBTC — jumping from 25,000 to 250,000 contracts! 🚀
Here’s why this matters:
1️⃣ BTC ETF options have been trading, but open interest and volumes were capped — now, with max… pic.twitter.com/juOkPSK5Gj

— AI·Socatis (@SocatisAI) July 30, 2025

SEC Rule Could Change Bitcoin’s “Risky” Narrative

NYDIG’s global head of research, Greg Cipolaro, argues that the SEC’s decision will only extend the commanding lead held by IBIT, at the expense of FBTC, currently the second-largest player in the Bitcoin ETF options market.

The data supports his stance. 

According to Coinglass data, IBIT now holds $85.5 billion in assets under management (AUM), dwarfing the $21.35 billion managed by FBTC. This fourfold gap may widen further once the new rules kick in.

The SEC’s decision comes down to qualifications. IBIT has consistently met the benchmarks set by exchanges and regulators. From day one, the fund saw explosive growth, amassing $1.9 billion in options exposure upon launch. 

UPDATE: Final tally of $IBIT's 1st day of options is just shy of $1.9 billion in notional exposure traded via 354k contracts. 289k were Calls & 65k were Puts. That's a ratio of 4.4:1. These options were almost certainly part of the move to the new #Bitcoin all time highs today pic.twitter.com/IN3s9hajJ2

— James Seyffart (@JSeyff) November 19, 2024

The fund's deep liquidity, high trading volumes, and tight tracking of spot Bitcoin prices made it the most logical candidate for regulatory expansion.

In contrast, FBTC, ARK 21Shares, and Grayscale Bitcoin Trust remain under older rules classifying them as “Bitcoin Trusts”, a structure regulators view as riskier due to existing concerns about trading volumes and potential for market manipulation. 

These funds must operate under the original 25,000-contract cap, putting them at a distinct disadvantage as institutional investors increasingly favor IBIT’s enhanced capacity for sophisticated options strategies.

But this goes beyond competitive advantage. 

Cipolaro also believes that the SEC’s decision to raise position limits on Bitcoin ETF options contracts could help reduce Bitcoin’s volatility and increase spot market demand.

With higher limits in place, institutional investors can now implement more advanced strategies, such as covered call selling, at a larger scale. This approach allows them to earn yield by giving up some upside potential. When applied across large portfolios, it can naturally dampen price swings.

He added that reduced volatility makes Bitcoin more appealing for risk-parity strategies, which are popular among institutional investors aiming for balanced exposure. 

It’s also worth noting that the SEC didn’t stop with position limits. On the same day, it approved several other ETF-related changes, most notably, the green light for in-kind creation and redemption of crypto ETFs. 

This mechanism allows fund shares to be exchanged directly for the underlying crypto, rather than cash.

Falling Volatility Could Lead to Sustained Demand

While popularly known for its price swings, BTC's volatility has enjoyed some normalcy in recent years, in terms of price swings. One key metric that tracks this volatility is Deribit’s BTC Volatility Index. This metric has dropped from 90 to just 37.77 in less than five years. 

While still far more volatile than traditional assets like stocks and bonds, this stabilization marks a crucial shift and one that Cipolaro believes could accelerate institutional adoption.

This changing perception hasn't gone unnoticed. Last week, Ray Dalio, the billionaire founder of Bridgewater Associates, recommended that investors allocate 15% of their portfolios to a mix of Bitcoin and gold. 

He argued that in today’s environment, with rising U.S. debt levels and monetary uncertainty, this combination offers one of the strongest return-to-risk profiles.

New York Times bestseller Robert Kiyosaki shares a similar view.

 The Rich Dad, Poor Dad author acknowledged that Bitcoin, like gold and silver, may see temporary market corrections in a crisis. 

BUBBLES are about to start BUSTING.

When bubbles bust odds are gold, silver, and Bitcoin will bust too.

Good news.

If prices of gold, silver, and Bitcoin crash…. I will be buying.

Take care.

— Robert Kiyosaki (@theRealKiyosaki) July 21, 2025

But he emphasized that downturns offer prime buying opportunities for long-term investors. In his view, the potential upside outweighs the near-term risks.

Cipolaro added that the drop in volatility could create a feedback loop. As price swings fall, more capital flows into spot Bitcoin and ETFs. That additional demand creates more stability and, in turn, stability attracts even more capital.