Lift Caps on Bitcoin and Ether ETFs

Bitcoin

Lift Caps on Bitcoin and Ether ETFs

In a move with broad implications for derivatives markets, Nasdaq crypto options are set for a major structural shift after a new rule filing with the US regulator.

Nasdaq proposal to lift caps on Bitcoin and Ethereum ETF options

Nasdaq has formally asked the Securities and Exchange Commission to eliminate position limits on options tied to spot Bitcoin and Ethereum exchange-traded funds listed on its venue. The proposal removes the 25,000-contract ceiling that previously capped how many options a single market participant could hold.

The rule change covers options linked to spot Bitcoin ETF and Ether ETF products from major issuers including BlackRock, Fidelity, Bitwise, Grayscale, ARK/21Shares, and VanEck. All of these ETFs trade on Nasdaq and had been subject to identical contract caps.

Nasdaq filed its proposal on January 7. However, the SEC chose to waive its standard 30-day waiting period and allowed the rule change to become effective immediately on January 22, accelerating implementation for the crypto options market.

The regulator can still suspend the amendment within 60 days of that date if it determines that extended review is warranted. Moreover, the agency has opened a public comment period and expects to issue a final determination by late February, leaving a window for further regulatory input.

Equal treatment with other commodity-based ETF options

Options give traders the right, but not the obligation, to buy or sell an underlying asset at a specified price before a set expiration date. Historically, exchanges applied position limits to such contracts to curb excessive speculation and reduce the risk of market manipulation.

Nasdaq argues that removing the cap on these digital asset-linked contracts will align them with options on other commodity-based ETFs, which typically do not face similar position limits. The exchange says this consistent treatment across asset classes improves market efficiency without increasing systemic risk.

According to the filing, the change is designed to advance fair and orderly markets, uphold just trading principles, and support an open, competitive environment. Furthermore, Nasdaq claims the updated framework does not impose any undue burden on competition and will instead enhance investor choice in crypto-linked derivatives.

The move also builds on the exchanges earlier regulatory approvals. In late 2025, Nasdaq secured permission to list options on single-asset crypto ETFs structured as commodity-based trusts. That earlier decision allowed trading in Bitcoin and Ether ETF options but left position and exercise limits in place at the time.

Previous efforts to expand Bitcoin ETF options capacity

Before the blanket removal of position limits, Nasdaq had already sought incremental flexibility for specific products. In November, the exchange filed a separate proposal to raise the position limit on BlackRocks iShares Bitcoin Trust options, trading under the ticker IBIT, from 250,000 contracts to 1 million contracts.

That earlier request cited rising institutional and retail demand for bitcoin etf options. It also argued that the existing cap constrained effective hedging, particularly for large liquidity providers and professional firms seeking to manage risk in rapidly growing spot Bitcoin ETFs.

Market participants expect other US options venues to follow Nasdaqs approach and pursue comparable filings. However, any parallel proposals will also require SEC review, and a coordinated framework would help standardize how crypto ETF regulation is applied across exchanges for these products.

Market impact and options open interest data

The impact of the new framework is already visible in trading metrics. BlackRocks Bitcoin ETF (IBIT) options currently rank 11th among all US-listed assets by options open interest, reflecting a significant build-up in institutional activity.

OpenCharts data shows that options tied to IBIT now account for more than 5.3 million contracts in open interest. That said, IBIT-listed derivatives still sit below gold and silver ETFs, highlighting that traditional commodity funds remain ahead in overall options depth despite the rapid rise of crypto-linked products.

Flows into the underlying spot ETFs have been mixed. Over the last three days, US Bitcoin ETFs recorded net outflows totaling $1.58 billion, signaling some profit-taking or repositioning by investors. Moreover, these flows arrived even as derivatives activity continued to expand.

BlackRock‘s IBIT led redemptions with $356.6 million withdrawn over that period, while Fidelity’s FBTC saw outflows of $287.7 million. Despite this, the robust options market suggests that hedging and speculative strategies around these funds remain in high demand.

Bitcoin and Ethereum price backdrop

The derivatives changes come against a backdrop of renewed volatility in underlying crypto prices. As of the latest available data, Bitcoin traded near $90,000, up 1% over the previous 24 hours, reflecting a continued bullish tone in spot markets.

Ethereum also gained 1% to trade around $3,000 after having fallen more than 11% over the preceding week. However, the rebound suggests some traders are rebuilding positions, which could further support liquidity in both spot and ether etf options markets.

Market structure specialists note that higher volatility often boosts demand for calls and puts as traders seek leverage or protection. Consequently, removing position limits may allow larger institutional strategies that previously faced operational constraints on Nasdaqs options platform.

Broader implications for Nasdaq crypto options infrastructure

The latest Nasdaq rule change forms part of a broader effort by the exchange to expand its digital asset infrastructure. Over recent years, Nasdaq has launched initiatives around tokenized equities and unified crypto indexes, reinforcing its ambition to be a central venue for regulated crypto-linked products.

In this context, the decision to remove position limits on nasdaq crypto options tied to Bitcoin and Ethereum ETFs signals a maturation of the asset class inside mainstream financial market plumbing. Moreover, it underscores the growing alignment between traditional equity and commodity derivatives rules and their digital asset counterparts.

Looking ahead, analysts expect this framework to support larger institutional participation, more sophisticated hedging, and tighter spreads in bitcoin etf options and related products. If the SECs final decision in late February confirms the current relief, Nasdaq could further cement its role as a key hub for regulated crypto derivatives in the United States.

In summary, the SEC‘s swift handling of Nasdaq’s filing, the rapid growth in IBIT open interest, and the evolving spot flows in Bitcoin and Ethereum ETFs collectively highlight how fast crypto-linked markets are converging with traditional derivatives infrastructure.