Joshua Lim discusses the implications of the SEC's approval of IBIT options in a detailed thread, emphasizing the evolving landscape of cryptocurrency trading and the role of established options markets. He begins by acknowledging the existing liquidity in the crypto options market, particularly highlighting Deribit, which handles approximately $40 billion in notional monthly trading of Bitcoin options, significantly outpacing the CME's $3 billion. Lim points out that while Deribit is an offshore and crypto-native venue, it attracts both retail traders and traditional finance (tradfi) firms, including notable market makers. He notes that these firms are drawn to the healthy margins available in crypto trading, despite their fluctuating interest in the sector over the years. The presence of institutional users on Deribit is also significant, with various trading strategies being employed, such as directional trades and volatility arbitrage. He raises questions about the potential for a short squeeze in Bitcoin options, referencing the historical context of market squeezes and the challenges of manipulating a $1 trillion asset class like Bitcoin. Lim argues that while such squeezes are theoretically possible, they are less likely to occur compared to smaller markets with limited supply. He also discusses the macroeconomic factors that have historically influenced Bitcoin's price movements, suggesting that these factors may overshadow the potential for options-driven price spikes. Lim contemplates the impact of IBIT options on the broader derivatives market, predicting that their introduction will enhance trading volumes and facilitate risk-netting across different products. He anticipates that the influx of traditional finance into the crypto space could lead to a dampening of volatility, as structured products become more prevalent. This could result in a significant increase in the issuance of IBIT-linked notes, further integrating traditional finance with the crypto ecosystem. He also speculates on the potential for an altcoin boom, driven by increased liquidity and margin lending against Bitcoin collateral. Lim believes that the options markets will help in pricing the risks associated with margin lending, making it more attractive for prime brokers to engage with crypto assets. Additionally, he predicts that basis spreads will compress as access to USD funding improves, which would further stabilize the market. In conclusion, Lim emphasizes that while there are risks associated with trading IBIT options, the overall landscape is poised for growth and transformation, driven by the convergence of traditional finance and cryptocurrency markets. The anticipated changes could lead to a more robust trading environment, benefiting both retail and institutional participants in the crypto space.