The volatility of Bitcoin brands could enter a new phase thanks to the Securities and Exchange Commission (SECOND).
The agency’s decision to increase position limits on most FNB Bitcoin options could help smoothing prices by encouraging strategies such as the sale of covered calls, which caps the advantage in exchange for constant income, according to Nydig Research.
This increase in position limits for the trading of options on IBIT came while the regulator approved the buyouts in kind for the Bitcoin Spot ETF.
By letting traders have ten times more contracts than before, Nydig wrote, the SEC opened the door to a more aggressive and sustained option. The covered call strategies, in particular, work better on a large scale.
They are designed to gain the yield of existing assets by selling an increase exposure, which can naturally delete the price movement if it is carried out on large wallets.
Bitcoin volatility is already decreasing, the Dribit BTC volatility index (DVVAD) showing a regular drop of approximately 90 to 38 in the past four years.
However, it stands out in relation to obligations, actions and other traditional assets. This makes it a tempting objective for investors who try to perceive income from market oscillations, effectively harvesting volatility, but also risky for institutions that require stable exhibitions.
“As volatility decreases, the asset becomes more invested for institutional portfolios looking for a balanced exposure to risks. This dynamic could strengthen demand in cash,” wrote Nydig analysts.
Ray Dalio, one of the first champions of these risk parity strategies, recently suggested an allocation of 15% to gold and crypto in the middle of the increasing debt.
“The feedback loop of the drop in volatility leading to an increase in the purchase of points could become a powerful engine of sustained demand,” concluded the company.
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