Blackrock ETF Call Option
Blackrock Bitcoin ETF Futures Manipulation
NOTHING STOPS THIS TRAIN
Back in mid-March I wrote these speculation posts on Blackrock getting their futures market approved. Six months later we have approval. Are you ready for the most bonkers bull market of all time, anon?
Now I will admit that my understanding of futures and derivatives is extremely limited. I've never used them (other than perpetuals which are very simple), so I definitely have a lot to learn here and need to defer more to the "experts".
https://x.com/dotkrueger/status/1837446959235584494
Options on IBIT are better, for the most part, than Perps. They can't be manipulated by BitMex, for example, to wick up or down and cause artificial "liquidations" because, in Hayes words, "Daddy needs a new Ferrari". They are regulated, and there is a separation between the casino and the option vendor -- unlike BitMex which played both roles.
So you're telling me that sometimes regulations actually work?
I mean lets be honest a lot of these laws exist for a reason. When a crypto exchange can act as liquidity provider and see every trade on the books it gives them a huge incentive to cheat. Funny enough this reminds me of FTX and SBF and how they were so incompetent and degenerate that they couldn't make money even though everyone had a ton of evidence that they were liquidating the competition unfairly.
2. Long IBIT call options allow people to capture the upside of Bitcoin with limited downside.
This is sentiment I also shared in the posts that I wrote back in March. An OPTION is just that: an option. It gives you the OPTION to buy/sell an asset at todays price (the strike price) at a future date. When Blackrock sells a call option to a client they are guaranteeing that client the ability to buy Bitcoin at a cheap price if number goes up.
This means that Blackrock is financially obligated to have enough collateral to sell the call option in the first place. If Bitcoin moons Blackrock will lose a lot of money if they didn't buy Bitcoin to hedge against the call option that they sold the client. On the flipside of this if Bitcoin tanks in value the person that bought the call option will simply opt to not exercise the option. Nobody buys an asset for higher than the current market price. In this case they only lose whatever the fee was to buy the option in the first place.
Options are a little weird in that they served a very needed purpose when they were first created, but are now leveraged for degenerate gambling purposes. For example a legitimate non-degen reason to buy an option is if you have a known income and you want to lock in the price today. Essentially it's a short-term loan where the client uses tomorrow's income to buy the asset today.
The Degenerate flip side of this is that the user never even wanted the asset (in this case Bitcoin) to begin with. This is where options become purely a gambling instrument. Rather than allow the option to expire and the contract to exercise and take custody of the BTC, the user instead just sells the contract back to Blackrock in exchange for cash. This is how it's normally done and there are funny cases of people receiving a pallet of eggs to a residential address because they gambled on the cost of eggs during COVID and accidentally allowed the egg's futures contract to expire: forcing them to take possession of the eggs they gambled on.
https://x.com/saylor/status/1837187033011220894
As part of a broader federal update on Monday, Chris Land, general counsel for U.S. Senator Cynthia Lummis (R-WY), testified that the SEC and thus likely other regulators have cleared the way for BNY to provide institutional custody of digital assets.
🤔
There's also news of this big bank getting permission to custody crypto. As weird as it sounds this is a relief and a win for decentralization, as the amount of crypto that Coinbase is holding in their vault is wholly unacceptable and a systemic threat to the entire industry. It will be good to get banks in custody of Bitcoin so that we aren't keeping it all in one place.
Conclusion
I was a little worried that Q4 wasn't going to perform well in terms of price action, but those fears are quickly evaporating into the ether. Hold onto your hats because it's about to get crazy over the next couple of months and year to come. A fundamental development like this takes at least a full year to play out, so once again we are right on track to see another peak in October or November 2025. This time is not different.