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  • Bitcoin ETF Options Will Lower Volatility: Galaxy's Thorn

Bitcoin ETF Options Will Lower Volatility: Galaxy's Thorn

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Bloomberg Nov 19 21:15 · 28.8k Views

Galaxy Digital Head of Firmwide Research Alex Thorn says the availability of options on the crypto sector leading $43 billion iShares Bitcoin Trust is likely to reduce volatility and increase the investor base for the original cryptocurrency.

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Transcript

  • 00:00 What do you think the effect of options being available on, I bet has,
  • 00:03 if any, on the market?
  • 00:04 I think it's a big effect.
  • 00:06 All other markets, commodities, equities, the derivatives and options markets are orders of magnitude larger
  • 00:11 than the spot markets.
  • 00:13 I think it gives institutions of really good abilities to hedge.
  • 00:15 I mean better than anything.
  • 00:17 But the onshore options market in the US is very thin, right?
  • 00:20 You have some CME options, used to have smaller shops, some of those went away.
  • 00:24 So outside of the OTC space, there's not been a good place for institutions to do options.
  • 00:29 And by the way, I should mention retail, 44% of U.S.
  • 00:31 equity options are treated by retail
  • 00:34 and they really can't access any options at all.
  • 00:36 So you can imagine if we get into,
  • 00:38 you know, a bull market where retails trading on Robin Hood and other fintech apps that those options could be really impactful.
  • 00:43 That was literally my first thought was how soon can you find these on Robin Hood?
  • 00:47 But
  • 00:48 I don't I don't work for them.
  • 00:48 So I'm not sure, but I honestly, I would be surprised if it's not quite soon.
  • 00:52 Well, my question is even when you saw the spot Bitcoin ETF's come out, you had a lot of people asking what is the read through effect, not just from
  • 01:00 the spot ETF to Bitcoin.
  • 01:02 Now you have to ask from option to spot ETF to Bitcoin.
  • 01:05 What does this mean for the spot market?
  • 01:07 I think you
  • 01:08 can take larger positions.
  • 01:09 I mean, I think in general you can hedge that against position.
  • 01:12 You absolutely can, but you have a robust futures market.
  • 01:14 Options are probably much more granular and tactically effective for shorting than
  • 01:19 I think personally than for futures.
  • 01:20 But I mean, I, it's, it's
  • 01:22 an enormously larger amount of liquidity in the overall space and that just raises the profile of
  • 01:27 the capital that can invest in the space.
  • 01:29 Are there any notes of caution that you would sound ahead of this or, or if this becomes available?
  • 01:35 I I think the big question that the industry has, the existing crypto industry is what does, I mean, this is an industry that's had to sort of exist on the sidelines, right?
  • 01:42 Heavily,
  • 01:44 you know, aggressively litigated against by regulators, let alone separated from a lot of the traditional financial system for so long.
  • 01:50 Big question for the industry is how it can maintain a Moat and stay in the driver's seat with, you know, track things like option ETF's in general, but then options in the ETF's, who knows what else might happen right from the tratify space moving in.
  • 02:01 You know, it's funny, it's kind of like a wave of options for people to be betting options to be.
  • 02:06 But what about next year?
  • 02:07 You think about the Trump administration coming in, potentially a new Treasury Secretary.
  • 02:12 Let's see how soon that happens, but also a new wave of potential products.
  • 02:17 We talk to people all the time on the show about people who are looking at that next set of spot ETF's.
  • 02:22 How soon do you get one tied to XRP?
  • 02:25 How soon do you get one tied to Solana?
  • 02:27 How liquid can those markets get
  • 02:29 if they launch?
  • 02:30 I think they can get quite liquid over the medium and longer term.
  • 02:34 In terms of time frame.
  • 02:35 I think it's it's pretty unclear.
  • 02:37 Jay Clayton I think was
  • 02:39 formally what was named
  • 02:42 January 4th, 2017.
  • 02:44 His name was officially put forward by then President Trump
  • 02:47 basically the day of inauguration and he wasn't confirmed until May by the Senate.
  • 02:51 So
  • 02:52 assuming something similar plays out, you're not going to see a new nominated
  • 02:56 confirmed chair of the SEC until several months.
  • 02:58 And so
  • 03:00 we just don't know.
  • 03:00 But I think look, the Ether futures have underwhelmed.
  • 03:03 I mean, sorry, the Ether spot ETF's have underwhelmed.
  • 03:05 I
  • 03:06 don't think that will last forever.
  • 03:07 So presumably there's a market for a Solana ETF or an XRP ETF.
  • 03:11 When it comes to regulators and who potentially you want to see in these positions.
  • 03:13 What are the names that come to mind?
  • 03:16 I think for the SEC, most of the industry's been very supportive of the idea of Dan Gallagher from Robin Hood.
  • 03:21 He's a long time SEC staffer, well respected in the building, obviously knows crypto very well.
  • 03:26 I think there are other good names as well.
  • 03:27 I think
  • 03:28 you're not likely to see, just
  • 03:30 in our opinion,
  • 03:31 an SEC chair named as a
  • 03:33 potential appointee until after Treasury
  • 03:36 shakes out.
  • 03:36 You think that that that person, whomever that will be, will want to have a say
  • 03:41 or have a seat at the table in discussing these?
  • 03:42 So.
  • 03:43 But it looks like I saw that Howard Lutnick is named as commerce secretary.
  • 03:46 I saw reports of that.
  • 03:48 Presumably that starts to mean maybe the Treasury is starting to settle out.
  • 03:51 Yeah.
  • 03:51 You see some of the names out there in different reports.
  • 03:53 It's people like Brian Brooks, for example.
  • 03:55 We've talked about Hester Purse as an idea before.
  • 03:58 You know, what about just Bitcoin itself?
  • 04:00 For a moment here, We were looking at a morning where much of the United States woke up to intensify geopolitical conflicts between Ukraine and Russia.
  • 04:08 And you saw Bitcoin prices really fluctuating this morning.
  • 04:12 We were before the market, the stock market opened, you were looking at declines.
  • 04:17 Even on a day with all that excitement around those options, around the spot, Bitcoin ETF's,
  • 04:22 does Bitcoin hold up as a haven or is it still too thought of as a risk on asset to be treated that way?
  • 04:30 I think it will hold up.
  • 04:31 I think
  • 04:32 if you take a little bit of a longer view than, you know, morning of a headline or even day of, you've seen Bitcoin actually perform quite well around geopolitical risk off events.
  • 04:41 You know, if you look like 7 days, 14 days out,
  • 04:44 I do think it's quite responsive, right?
  • 04:46 I mean, it's such a global market.
  • 04:47 It's so liquid, people can trade it all the time.
  • 04:49 It really is more fun to me to watch the Bitcoin price when a headline, global headline comes out like that.
  • 04:55 I think look over time as it's more widely held, volatility will decrease, options will help dampen.
  • 05:00 Volatility
  • 05:01 and as volatility comes down, people can take larger position sizes and
  • 05:05 you know, you should see that
  • 05:08 it become more stable over time and then
  • 05:10 people looking more towards fundamental use case than just as a sort of a venture like equity risk bet.
  • 05:15 All right, we got Mike Novogratz's thoughts on this.
  • 05:17 But yeah, your thoughts,
  • 05:19 Strategic Bitcoin Reserve, Is it going to happen?
  • 05:22 I don't know if it's going to happen.
  • 05:23 I think the game theory is pretty straightforward.
  • 05:26 You've already got countries with Bitcoin exposure either directly like El Salvador,
  • 05:30 a number of them mining Bitcoin, others in joint ventures to mine or acquire Bitcoin.
  • 05:36 Given how positive the incoming administration appears to be towards Bitcoin in particular, but also crypto,
  • 05:42 it would be kind of insane if you're a foreign nation not to look at adjusting or
  • 05:46 trying to match your crypto policy, at least for competitiveness reasons.
  • 05:50 So that plays back towards the US as well.
  • 05:53 I think every Fiat currency in the history of the world has collapsed.
  • 05:56 So I don't know if our politics is ready to think long term about what might come after the dollar, even if it's another 100 years.
  • 06:04 But it's reasonable to wonder and look as a possibility.