How the emergence of ETFs will reduce Bitcoin volatility | CoinDesk JAPAN

The emergence of new trading infrastructure and investment products is one of the key elements that has contributed to the success of bitcoin (btc), which allows access to new investors. The arrival of bitcoin spot ETFs (exchange traded funds) is causing this trend to accelerate even more.

These breakthroughs will have no impact on the structure of bitcoin's market beyond liquidity providers and trading desks.

We can anticipate decreased volatility as the bitcoin market structure matures. We can expect the volatility to decrease as the Bitcoin market structure matures.

Our discussion focuses on how the emergence of physical ETFs is likely to lead to this change due to several significant shifts.

ETFs are commonly used to calculate reference prices in the market The volume increase was largely due to the 3:00 pm and 4:00 pm ET timeslots, which were close to the ETF price fix.

Major trading pairs' daily trading volume percentage during the 30 minutes starting at 3:00 pm and 3:30 pm et, is indicated by the chart below. During the 30 minutes beginning at 3:00 PM and 3:30 PM ET, major trading pairs display the percentage of Bitcoin's daily trading volume as reflected in the chart below.

ETF price fixes provide a transparent and consistent reference point recognized by market participants, consolidating large trades into a common time period, reducing market impact and overall market volatility. Less than 5% of daily trading volume was attributed to trading volumes during these two time periods, The ETF price fixes now account for around 10-13% of daily trading volume (based on the percentage of trading volume for the 30-minute period beginning at 15:00/light blue and 15:30/red) and are recognized by market participants as transparent and consistent, Merging major transactions into a uniform time frame, Minimizing the impact of the market and overall instability.

New options market for ETFs

All three exchanges that currently list Bitcoin spot ETFs have already applied to the SEC to allow ETF options to be listed. The SEC has been granted permission for a new options market for Ethereum by three exchanges that currently offer Ethereum spot etfs.

There are problems with the clearing and settlement process, which takes an average of one to eight months for the sec review. There are issues with the clearing and settlement process, which causes the SEC review to take one to eight months.

The Bitcoin options market could be greatly stimulated if ETF options are approved. At the moment, only investors who trade on offshore Exchanges and platforms that are not accessible to Americans can access the bitcoin options market. However, allowing options on bitcoin spot ETFS could greatly expand the options market beyond these two markets.

Even after the massive growth in 2023, the Bitcoin options market should still place a high value on bitcoin in 2024. It also expands the importance of events that drive price movements, such as expirations and dealer positioning.

20 years of ETF performance meets the Bitcoin revolution

The volatility of liquid ETFs would be lessened by a more developed options market that would allow investors to pursue a wider range of investment strategies. The Bitcoin revolution coincides with 20 years of ETF performance, which highlights the significance of events that influence price movements.

The ETF revolution is now having a positive impact on the Bitcoin market and it's exciting to observe. Increased participation has resulted from the introduction of bitcoin spot etfs, it's possible that this is resembling gold ETFs from the mid-1990s, For more than two weeks now, the Bitcoin Spot ETF has been introduced and will continue to do so, It has already exceeded $1.5 billion in daily trading volume, which is equivalent to 219 billion yen, 146 yen per dollar is the equivalent in Japanese yen).

In case you're wondering, this number is around 20% of the trading volume of the bitcoin spot market on a good day.

|Translation and editing: Akiko Yamaguchi, Takayuki Masuda

|Image: Shutterstock

|Original text: How the Launch of Spot ETFs Could Dampen Bitcoin’s Volatility