NYDIG: Increasing Bitcoin ETF option position limits may reduce volatility while boosting spot demand

PANews reported on August 4th that, according to CoinDesk, NYDIG Research stated that the U.S. Securities and Exchange Commission (SEC)'s decision to increase position limits for most Bitcoin ETF options is expected to mitigate Bitcoin price volatility by encouraging strategies such as covered call selling. This strategy, which aims to generate stable returns, limits price upside. By allowing traders to hold ten times more contracts than before, the SEC has opened the door to more active and sustained options trading. Covered call strategies, in particular, work best with large-scale trading.

Bitcoin volatility is currently declining. Deribit's BTC Volatility Index (DVOL) shows that it has fallen from 90 to 38 over the past four years, though it remains higher than traditional assets. NYDIG analysis suggests that reduced volatility makes Bitcoin more attractive for institutions seeking a balanced risk profile, potentially strengthening spot demand and creating a cycle where reduced volatility drives increased spot buying, driving continued demand growth.