Bitcoin’s Wild Ride: ETFs, Minaj, and Quantum Woes

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What to know:

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Greetings, financial adventurers,

Welcome to the asylum known as Crypto Long & Short. This week, we delve into the absurdities of ETFs, the surrealities of Mar-a-Lago, and the existential dread of quantum computing. Buckle up.

  • Gregory Mall explains how ETFs have turned bitcoin into a Wall Street plaything.
  • Francisco Rodrigues rounds up headlines that will either enlighten or terrify you.
  • Mid-caps flex their muscles in the Chart of the Week, because why not?

Cheers to another week of financial farce!

-Alexandra Levis

Expert Insights

When ETF Options Turn Bitcoin into a Wall Street Puppet

– By Gregory Mall, chief investment officer, Lionsoul Global

Ah, the U.S. spot bitcoin ETFs-a marvel of financial engineering. The iShares Bitcoin Trust ETF (IBIT) has swelled like a plutocrat’s ego, hoarding tens of billions in assets. But the real spectacle? The proliferation of IBIT options, a carnival of convexity that has Wall Street dealers hedging like their lives depend on it (they do).

Open interest in IBIT options now rivals the volumes of Deribit, that offshore haven of crypto degeneracy. Bitcoin’s volatility, once the domain of perpetual futures and liquidation cascades, is now tethered to the whims of U.S. equity markets. How quaint.

From Offshore Leverage to Onshore Gamma

Gone are the days when bitcoin’s price swings were driven by offshore leverage and the tears of retail traders. Enter ETF options, where dealers sell optionality and hedge delta exposure, creating a procyclical feedback loop that amplifies every twitch of the market. It’s financial engineering at its most baroque.

Because IBIT holds actual bitcoin, these hedging flows spill into the underlying market, turning bitcoin into just another asset in the great Wall Street casino. Digital gold? More like leveraged Nasdaq with a side of existential dread.

The February selloff was a masterclass in this new dynamic. As prices plunged, dealers’ short gamma positioning likely exacerbated the downturn, only to reverse course once the dust settled. Bitcoin, it seems, is now a creature of balance sheets and derivatives, its fate tied to the machinations of traditional finance.

Chart 1 below illustrates this absurdity. The relationship between IBIT option volume and BTC volatility has tightened, because of course it has.

Chart 1: The Dance of IBIT Option Volume and BTC Volatility

Table 1: OLS Regression of IBIT Options Volume on BTC Volatility

Table 2: BTC Volatility Distribution Pre and Post IBIT Options

Behold, the data. Volatility is now concentrated during U.S. trading hours, because Wall Street demands its pound of flesh.

Digital Gold or Leveraged Nasdaq?

The “digital gold” narrative is as threadbare as a Victorian frock coat. Bitcoin’s correlation with gold is about as stable as a three-legged stool, while its ties to the Nasdaq have doubled since IBIT options debuted. Thanks to delta-neutral strategies and derivatives positioning, bitcoin is now a full-fledged member of the financial circus.

Chart 2: Bitcoin’s Correlation with Nasdaq Pre- and Post IBIT Options

Bitcoin may have begun as an outsider, but it’s now firmly ensconced in the system. For long-term allocators, this doesn’t negate its structural appeal, but it does mean short-term price action is a slave to positioning, hedging, and cross-asset flows. Welcome to the big leagues.

Disclaimer: This is not investment advice. If you lose your shirt, don’t come crying to us.

Lionsoul Global Advisors LLC is registered with the Texas State Securities Board (CRD #: 324883). Our services are for non-U.S. investors who meet stringent eligibility criteria. Don’t bother if you’re not one of them.

Headlines of the Week

– By Francisco Rodrigues

This week, the crypto world outdid itself. Trump hosted a crypto summit at Mar-a-Lago, complete with Goldman Sachs, Franklin Templeton, and Nicki Minaj. Meanwhile, a crypto-linked ETF debuted with $17 billion in volume, and quantum computing threatened to unravel the entire bitcoin ecosystem. Just another week in paradise.

  • Goldman Sachs, Franklin Templeton, and Nicki Minaj: Inside Trump’s Surreal Mar-a-Lago Crypto Summit – Because nothing says “financial innovation” like a panel on tokenized real estate with a side of celebrity spectacle.
  • To Freeze or Not to Freeze: Satoshi and the $440 Billion in Bitcoin Threatened by Quantum Computing – Quantum computers: coming for your bitcoin and your job security.
  • ProShares’ Stablecoin-Ready ETF Sees $17 Billion Debut, Sparking Speculation About Circle – Because what’s a stablecoin without a bit of drama?
  • Bitcoin Balances on Binance Hit Highest Since November 2024 – Here’s What It Means – Bearish implications? Or just another day in crypto?
  • Specialized AI Detects 92% of Real-World DeFi Exploits – AI: the new sheriff in the Wild West of DeFi.

Chart of the Week

Mid-Caps Flex While Large-Caps Weep

Bitcoin is down 27.7% YTD, and large-cap indices are faring even worse. But mid-caps? They’re showing surprising resilience, with the CD80 outperforming by 7%. It’s a reversal of the typical “risk-off” dynamic, suggesting that idiosyncratic performers like Hyperliquid (HYPE) and Canton Coin (CC) are decoupling from the institutional sell-off. Seller exhaustion, or just a blip? Only time will tell.

Looking for more? Visit coindesk.com/institutions for the latest crypto news and data offerings. Or don’t. We’re not your mother.

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2026-02-25 20:08