The Zhitong Finance App learned that cryptocurrency bulls expect that if Bitcoin ETF options are approved, institutional investors will be able to implement more trading strategies, some of which may drive the price of Bitcoin to rise sharply.

Investors are closely watching whether and when the US Options Clearing Corp. (Options Clearing Corp.) and the Commodity Futures Trading Commission (Commodity Futures Trading Commission) will approve the iShares Bitcoin Trust ETF options. Prior to that, the US Securities and Exchange Commission (SEC) approved Nasdaq's request to list such products last month.

Although there are many cryptocurrency options products currently on the market, most of them lack regulation or are completely unregulated, which makes some institutions unwilling to participate in trading due to compliance requirements.

Eliézer Ndinga, head of digital asset strategy and business development at 21Shares, said that if Bitcoin ETF options are approved, more institutional investors will be allowed to use these tools to execute different strategies. For example, investors will be able to implement a call option strategy where an investor holding an asset sells a call option on that asset to generate a profit.

A call option gives the contract holder the right to buy the underlying asset at a specified price before the expiration date, but there is no obligation to force the purchase.

Meanwhile, investors may expect a so-called “gamma squeeze” if Bitcoin ETF options are launched. This phenomenon usually occurs when assets are bought in large numbers in a short period of time. When institutions sell these call options, they need to buy the underlying asset to hedge their positions. As asset prices rose, they had to buy more to maintain hedging, further driving up asset prices.

In 2021, the surge in GameStop (GME.US) was the result of gamma compression.

Jeff Park, head of institutional strategy at Bitwise Asset Management, said the gamma squeeze may have a more profound impact on Bitcoin than on traditional assets. He pointed out that traditional assets such as stocks and bonds have a valuation framework, and Bitcoin does not apply this rule. Park explained, “Technically speaking, stocks can't be squeezed forever because at some point, companies will issue new shares, or bears will enter the market to push prices back to a reasonable level. But Bitcoin doesn't have these dynamics, which means Bitcoin's upside is almost limitless.”

Despite this, Park said it is still uncertain how popular a bullish strategy using Bitcoin ETF options for back-up will be. He pointed out that in the current cryptocurrency options market, few large cryptocurrency players actually make a profit by selling ready call options.

Darius Tabai, CEO of the decentralized exchange Vertex, believes that Bitcoin is less likely to experience a large-scale gamma squeeze. He explained that the reason this phenomenon happened on “MEME stocks” like Game Station is because these stocks have no futures contracts, making it difficult for them to short. However, the Bitcoin futures market is very mature, can be easily shorted, and is unlikely to be squeezed out, which breaks the logic of gamma squeeze.