Bitcoin’s Institutional Shift Is Becoming Impossible to Ignore

TL;DR

• Larry Fink says Bitcoin is an asset you hold, not trade. 

• Nasdaq asks regulators to increase trading limits on BlackRock's Bitcoin ETF options. 

• The CFTC OKs a Bitcoin collateral pilot for the derivatives market.

Larry Fink Says Bitcoin Is an Asset You Own for a Purpose, Not Trade 

If you had asked anyone in Bitcoin six years ago whether Larry Fink would ever be vocal in support of BTC, chances are everyone would have said no. 

But we're not here to talk about the past.  

Larry Fink was on stage at the New York Times DealBook Summit with Coinbase CEO Brian Armstrong and said, very promptly, that Bitcoin is an asset you hold, not trade.

He further elaborated that he sees a keen interest from sovereign wealth funds that bought shares in the IBIT Bitcoin ETF. 

Fink also had a reasonable argument for BTC's volatility, citing the amount of leverage in the system, which leads to large price swings. 

Because of High Demand, Nasdaq Had to 4X the Trading Limits for BlackRock's Bitcoin ETF Options 🚀

Speaking of BlackRock, there’s also some interesting news from its Bitcoin ETF options. 

Nasdaq ISE filed a proposal with the SEC, which was published in the Federal Register, for permission to significantly increase the trading limits for options tied to BlackRock's Bitcoin ETF, IBIT.

The exchange aims to raise the position limit for IBIT options from 250,000 contracts to 1 million contracts. 

Initially, the position limit was already increased from 25,000 to 250,000 earlier this year, and Nasdaq wants to quadruple that. 

Nasdaq argues that the existing limit now impedes market makers and institutional desks that rely on options for hedging and yield-generation strategies. 

The exchange is also keen to protect the market from serious risks. They stressed that even if someone used all 1 million contracts at once, it would still only be 7.5% of the ETF's shares. 

If approved, IBIT would achieve the same status as some of the world's largest ETFs, such as SPY, QQQ, and EEM.

Furthermore, Nasdaq is also asking regulators to remove limits on FLEX IBIT options, which are custom options primarily used by large institutions. This would align with the rules for gold-based ETFs and could open the door for new financial products. 

CFTC OKs Bitcoin Collateral Pilot for the Derivatives Market 👀

The regulators are also a keen focus for our last story of the day. 

The Commodity Futures Trading Commission (CFTC) announced a pilot program allowing Bitcoin and a narrow selection of other digital assets to be used as collateral in the derivatives market. 

The announcement includes new guidance for tokenized collateral, a limited no-action framework for futures commission merchants (FCMs), and the withdrawal of legacy restrictions that the agency said are no longer relevant following passage of the GENIUS Act.

For the first three months, all participants in the pilot program must report weekly to the CFTC and detail the total amount of digital assets held in customer accounts, broken out by asset and account class. 

In addition to the pilot, the CFTC’s Market Participants Division, the Division of Market Oversight, and the Division of Clearing and Risk issued formal guidance on how tokenized assets should be evaluated within the existing regulatory frameworks.

This means we could see a future in which the CFTC enables Bitcoin and other digital assets (such as tokenized U.S. treasuries or money market funds) to be used as digital collateral! 

Back when I started, I envisioned a future in which the capital markets would be tokenized, and Bitcoin would become money. It seems like we are heading towards that future now. 

Elsewhere in Bitcoin 📖

A quick look at what else has been happening in Bitcoin: 

• Bloomberg’s ETF Analyst says the Bitcoin is the tulip bubble statement is wrong

• According to a Coinbase executive, more Eurozone countries will likely buy Bitcoin

• Strive Asset Management raises $500 million to buy more Bitcoin

• Binance’s CZ is convinced that the four-year cycle is over

• NVIDIA’s CEO is bullish on mining and Bitcoin

Your fellow stacker in sats, 

Patrick Lowry

PS: Connect with me up on X if you want to hear more of my thoughts on Bitcoin and digital assets.

Disclaimer: The opinions expressed in this newsletter are solely those of the author and do not necessarily represent the views of any associated company. This newsletter is for educational and informational purposes only and should not be construed as investment, financial, or any other professional advice. Investing in cryptocurrencies is highly speculative and carries a significant risk of substantial financial loss, so you must conduct your own thorough research and consult with independent professional advisors before making any decisions.