BlackRock's Bitcoin exchange-traded fund (ETF) may significantly expand its market presence following the SEC's decision to raise position limits for various Bitcoin funds. The SEC increased the allowable positions from 25,000 to 250,000 for ETFs with options, affecting the iShares Bitcoin Trust ETF (IBIT) but not Fidelity's Wise Origin Bitcoin Fund (FBTC). This adjustment is expected to enhance IBIT's lead over competitors, particularly as it manages $85.5 billion in assets compared to FBTC's $21.35 billion. The raised limits aim to mitigate Bitcoin's volatility, fostering increased demand in the spot market and enabling sophisticated options strategies like covered call selling. The SEC's recent approvals also introduced in-kind creation and redemption for crypto ETFs, enhancing market structure and investor access. This shift could compel financial institutions to adapt further to maintain competitiveness in arbitrage activities. Overall, falling volatility might lead to sustained demand as institutional investors seek balanced risk exposure.

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