Share this article
Higher Bitcoin ETF Options Limits May Cut Volatility, but Boost Spot Demand: NYDIG
Bitcoin’s volatility has been declining but remains higher than traditional assets, making it attractive for income generation but risky for institutions seeking stability.
Updated Aug 4, 2025, 2:44 p.m. Published Aug 3, 2025, 8:00 p.m.
What to know:
- The SEC’s decision to raise position limits on bitcoin ETF options could reduce bitcoin’s volatility by further enabling strategies like covered call selling.
- These strategies involve selling upside exposure for income, potentially suppressing price movement when implemented across large portfolios.
- Bitcoin’s volatility has been declining but remains higher than traditional assets, making it attractive for income generation but risky for institutions seeking stability.
Bitcoin’s trademark volatility may be entering a new phase thanks to the Securities and Exchange Commission (SEC).
The agency's decision to raise position limits on options for most bitcoin ETFs could help smooth price swings by encouraging strategies like covered call selling, which caps the upside in exchange for steady income, according to NYDIG Research.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
That increase in position limits for options trading on IBIT came as the regulator approved in-kind redemptions for spot bitcoin ETFs.
By letting traders hold ten times more contracts than before, NYDIG wrote, the SEC has opened the door to more aggressive and sustained options activity. Covered call strategies, in particular, work best at scale.
They’re designed to earn yield from existing holdings by selling upside exposure, which can naturally suppress price movement if done across large portfolios.
Bitcoin’s volatility has already been on the decline, with Deribit’s BTC Volatility Index (DVOL) showing a steady decline from around 90 to 38 over the past four years.
Still, it stands out compared to bonds, stocks, and other traditional assets. That makes it a tempting target for investors trying to collect income from market swings, effectively harvesting volatility, but also risky for institutions that require stable exposures.
“As volatility declines, the asset becomes more investable for institutional portfolios seeking balanced risk exposure. This dynamic could reinforce spot demand,” NYDIG’s analysts wrote.
Ray Dalio, one of the earliest champions of such risk-parity strategies, recently suggested a 15% allocation to gold and crypto amid rising debt levels.
“The feedback loop of falling volatility leading to increased spot buying could become a powerful driver of sustained demand,” the firm concluded.
Read more: Wall Street Has Claimed Bitcoin—Now What?
More For You
What to know:
- As of October 2025, GoPlus has generated $4.7M in total revenue across its product lines. The GoPlus App is the primary revenue driver, contributing $2.5M (approx. 53%), followed by the SafeToken Protocol at $1.7M.
- GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025 , with a peak of nearly 1 billion calls in February 2025. Total blockchain-level requests, including transaction simulations, averaged an additional 350 million per month.
- Since its January 2025 launch , the $GPS token has registered over $5B in total spot volume and $10B in derivatives volume in 2025. Monthly spot volume peaked in March 2025 at over $1.1B , while derivatives volume peaked the same month at over $4B.
More For You
French Banking Giant BPCE to Roll Out Crypto Trading for 2M Retail Clients
The service will allow customers to buy and sell BTC, ETH, SOL, and USDC through a separate digital asset account managed by Hexarq.
What to know:
- French banking group BPCE will start offering crypto trading services to 2 million retail customers through its Banque Populaire and Caisse d’Épargne apps, with plans to expand to 12 million customers by 2026.
- The service will allow customers to buy and sell BTC, ETH, SOL, and USDC through a separate digital asset account managed by Hexarq, with a €2.99 monthly fee and 1.5% transaction commission.
- The move follows similar initiatives by other European banks, such as BBVA, Santander, and Raiffeisen Bank, which have already started offering crypto trading services to their customers.
Top Stories
