On January 7, 2026, Nasdaq officially submitted a rule change application to the SEC through its options trading platform, with the core aim of removing the current 25,000 contract position limit on Bitcoin and Ethereum spot ETF options. According to public documents and disclosures from media outlets such as Jinse Finance and Rhythm, this adjustment will cover multiple spot ETF options products, including BlackRock IBIT and Fidelity FBTC, making them the first batch of crypto asset tools included in the framework of "aligning with other commodity ETF options." Once crypto assets are fully integrated into the regulatory template for traditional commodity ETFs, the distribution of chips in the options market, liquidity supply, and risk transmission paths will undergo structural changes: whether traditional finance is opening a larger table for crypto assets or locking them into a more rigid game order is already a matter of market debate.

A Rule Application: The ETF Options Position Ceiling is Set to be Broken

● Meaning of the Position Limit: The so-called 25,000 contract position limit refers to the total position size that a single market participant can hold in a specific Bitcoin or Ethereum spot ETF option, which cannot exceed 25,000 contracts, regardless of the distribution of long or short positions and expiration dates. For asset managers and market makers managing billions or even hundreds of billions of dollars, such a limit means they cannot deeply engage in swing hedging, structured product nesting, or complex inter-period arbitrage on a single underlying asset, forcing their strategies to be cut into smaller position units.

● Goal of the Rule Change: According to the documents submitted to regulators on January 7, the core of Nasdaq's application is to remove the 25,000 limit on BTC/ETH spot ETF options and clearly aims to align with the position rules of "other commodity ETF options." In other words, once Bitcoin and Ethereum are aligned with traditional commodity ETFs in terms of options regulation, they will no longer be regarded as special assets requiring additional "limit supervision," but will be included in a more standardized commoditized derivatives framework.

● SEC Discretion and Suspension Rights: Information from sources such as Rhythm indicates that the SEC retains substantial discretionary space both before and after the rules take effect, including the ability to exercise a suspension right for up to 60 days to further review or request modifications to the relevant rules. This statement comes from public reports rather than formal adjudication documents, reflecting more of the market's understanding of the SEC's consistently cautious attitude rather than a precise definition of specific procedural nodes.

● Rumored Timeline Attributes: Discussions around "whether the review cycle will be shortened," "whether the 30-day review period will be waived," and "whether it will be implemented before the end of February" are more inclined towards rumors and market speculation, and have not yet been confirmed in public documents or official statements. The only certainty at present is that: the rules are under review, and the SEC retains the right to suspend or veto; any specific implementation timeline and judgments of inevitable approval should be viewed as part of trader sentiment rather than facts that can be written into the rule text.

Leading Issuers Step Forward: Who is Fighting for Greater Leverage Space

● Symbolic Significance of Inclusion: According to a single source, the objects of this rule adjustment include the options contracts corresponding to six spot ETF issuers, including BlackRock IBIT and Fidelity FBTC. Even though public materials do not list all product codes one by one, just from the scale and brand effect of IBIT and FBTC, the regulatory authorities implicitly include the "most representative leading spot ETFs" in the new rule trial, which itself sends a signal: whoever stands higher in the spot layer has a greater qualification to first gain access to a more relaxed derivatives tool space.

● Spot + Options Linkage Demand: For traditional asset management giants like BlackRock and Fidelity, spot ETFs are just the first layer of entry into crypto assets; what truly affects the yield curve and risk management capabilities is the entire set of linked strategies of "spot + options + other on-exchange derivatives." Once the position limit is relaxed, their flexibility in structural product design, volatility trading, dynamic hedging, and cross-asset allocation will increase, and combined with their large management scale, it may accelerate the formation of a positive feedback loop of "leading ETFs + leading options liquidity."

● Space for Market Makers and Hedge Funds: For market-making institutions and hedge funds trading around these ETFs, relaxing the position limit means they can take on larger buy and sell orders and volatility risks, providing deeper buy and sell orders and a denser strike price gradient on the options side. At the same time, they can also break down risks more finely through larger-scale Delta hedging, Gamma trading, and cross-term structure layouts, flowing back into a broader investment portfolio, enhancing the overall market's liquidity capacity.

● Reinforcement of On-Exchange Market Position: The traditional institutions' reliance on compliant derivative tools for risk management will not decrease due to the "decentralized narrative" of crypto assets; rather, it will continue to rise as regulation clarifies. Nasdaq and on-exchange markets like CME, leveraging their advantages in clearing risk control, transparent transactions, and contract standardization, are expected to absorb more risk transactions that originally remained in off-exchange structured products and off-exchange options, effectively "locking" crypto volatility back into traditional financial infrastructure.

Lackluster On-Chain and Quiet Off-Exchange: Where Will Liquidity Be Awakened

● Current Low Participation: On-chain data providers like Glassnode show that the Bitcoin market is still in a low participation state: the number of active addresses, on-chain transaction counts, and the movement of chips by long-term holders are all relatively quiet, and the trading volume on spot exchanges has not yet returned to bull market highs. Against this backdrop, even if spot ETFs attract some incremental funds, the "on-chain native momentum" of crypto assets remains insufficient, more reflecting a slow migration of existing funds between different vehicles.

● Options Capacity and Price Discovery: During periods of weak spot transactions and on-chain activity, expanding the capacity of ETF options theoretically helps to enrich price discovery channels and order book depth. More options contracts' positions and transactions can form a more complete implied volatility curve, providing benchmarks for institutional pricing and risk transfer, and flowing back to the spot and futures markets through hedging chains, thereby "amplifying the efficiency of limited liquidity" in a sluggish environment.

● Risks of a Double-Edged Sword Effect: However, if the regulation opens up capacity but the real willingness to participate does not keep pace, what may occur is a situation where volatility is amplified while transactions do not materially increase. A few large institutions hedging and adjusting positions in a relatively thin options market will make the implied volatility curve highly sensitive to new orders, and prices may swing dramatically under small transaction volumes, with retail and small institutions' "perceived volatility" being further amplified.

● Insights from Mature Commodity ETF Options: From the experiences of other commodity ETFs, mature and ample options markets often attract hedging and arbitrage funds back, such as producers and traders hedging spot risks through on-exchange options, and cross-market arbitrage funds utilizing price differences for risk-free or low-risk trading. These funds are not primarily focused on "directional bets," but rather aim for risk-neutral returns, and their continued participation can enhance market depth and compress extreme volatility in the medium to long term, providing an important reference for the transition of crypto assets to "commoditized assets."

Formation of a New Regulatory Order: From Senate Bills to Exchange Self-Reconstruction

● Main Line of the Market Structure Bill: The crypto market structure bill draft recently released by the U.S. Senate Agriculture Committee focuses on clarifying the regulatory division of labor between spot and derivatives and the evolution path of market structure. Although the details of the draft are complex, the main line of thought is clear: to incorporate some crypto assets into the commodity attribute framework, reserving space for layered regulation and collaborative division of labor for spot and derivatives, avoiding regulatory vacuums and overlapping jurisdictions.

● Nested Relationship of Nasdaq's Actions: Within this larger framework, Nasdaq's push to align BTC/ETH spot ETF options with other commodity ETF options rules is essentially actively embedding its product structure into the "commoditization and standardization regulatory path." By packaging crypto ETF options as regulatory objects similar to gold, energy, and other commodity ETFs, the exchange is striving for greater business space while also providing a "replicable template" for regulators.

● Balance of SEC Power Design: From an institutional perspective, the SEC's retention of review rights over rule changes and the longest suspension right of 60 days reflects a balanced approach between encouraging innovation and preventing systemic risks. Regulation has not outright denied the expansion of crypto ETF options, but through reversible procedural arrangements, ensures that it can swiftly intervene and pull the "emergency brake" in case of abnormal market or macro conditions.

● Triangular Game Pattern: Exchanges hope to expand product lines and increase trading and clearing revenues; issuers seek more flexible derivatives tools to serve institutional clients and enhance ETF competitiveness; regulators focus on systemic risks, investor protection, and cross-market contagion effects. The outcome of the triangular game surrounding "whether to fully incorporate crypto assets into existing commodity regulatory tracks" will not only determine the specific terms of the rule text but also reshape the position of crypto assets in the global financial coordinate system.

Escalation of Long-Short Confrontation: A New Game Script on the Options Table

● Participant Strategy Differentiation: After the position limit is lifted, the strategy differentiation among market makers, traditional asset managers, and crypto-native funds will become more pronounced. Market makers tend to leverage larger positions to capture bilateral liquidity, earning the bid-ask spread and volatility risk premium; traditional asset managers focus more on using options to cover spot positions, constructing covered calls, protective puts, and yield enhancement strategies; crypto-native funds may link ETF options with coin-based futures and perpetual contracts, building complex arbitrage and hedging structures across markets and margin systems.

● Squeeze on Retail Pricing Power: As larger-scale options positions become more easily concentrated in a few institutions, the marginal influence of retail investors on price formation will be further weakened. Implied volatility, tail protection costs, and short-term price elasticity are increasingly dominated by the hedging demands and risk preferences of large institutions, with ordinary investors more passively holding ETFs or engaging in small-scale options trading to "follow" volatility, even bearing the chain reactions triggered by institutional rebalancing during extreme market conditions.

● Transmission Chain in Extreme Scenarios: In potential extreme scenarios, such as large-scale redemptions and panic triggered by macro shocks or sudden regulatory events, concentrated hedging and position adjustments on ETF options will quickly transmit to the spot and coin-based derivatives markets. Market makers, forced to hedge Gamma exposure, may have to buy or sell significantly in the spot and futures markets, amplifying the price volatility of Bitcoin and Ethereum; meanwhile, the leverage structure and liquidation mechanisms on crypto-native platforms may further amplify this volatility, creating "secondary shocks" through forced liquidations and chain liquidations.

● Evidence of Diverging Views: Jinse Finance emphasizes that "this adjustment will align crypto ETF options with other commodity fund options in terms of regulation," reflecting part of the market's optimistic expectations for standardization and mainstreaming; while Rhythm mentions that "the SEC retains the power to suspend the rules within 60 days," which some participants interpret as a signal of regulatory vigilance towards the expansion of crypto derivatives. The same institutional arrangements are viewed by bulls as a milestone confirming the status of crypto assets, while bears see it as a source of uncertainty that could "hit the brakes" at any time.

Unwritten Suspense in the Rules: Time, Scale, and the New Normal

The final approval result and specific timeline of the SEC for Nasdaq's rule change application remain unknown, and cannot be assumed to be inevitably approved or to take effect permanently once approved. What can currently be confirmed is that the application has been submitted, and the direction of the rule design is to align with other commodity ETF options. However, whether the regulation will be released and at what pace it will be released still depends on the subsequent review process and the macro financial environment. For crypto assets, the lifting of the position limit could potentially become a key leap towards deeper integration with traditional finance: the expansion of options capacity will reshape liquidity distribution, volatility structure, and the transmission paths of risk both on and off the exchange. For traders and institutions, during this uncertain phase, it is crucial to closely monitor three major signals: regulatory statements, changes in transaction structure, and the evolution of the ETF spot-futures price spread: the former determines the institutional boundaries, while the latter two reflect changes in capital behavior and expectations. A longer-term question is: when crypto ETF options are fully commoditized in regulatory and market practice, becoming derivative tools similar to gold and crude oil, will the market still view them as "exotic assets," or will they ultimately be classified as ordinary members within a basket of risk assets? This is a true suspense beyond the rule text, yet it concerns the pricing power of the entire industry.

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