The US Securities and Exchange Commission (SEC) has approved options trading for Ethereum ETFs, marking a significant regulatory development in the digital asset space.

This move aims to increase liquidity and attract institutional investors, allowing a wider range of participants to engage with Ethereum without the need for direct ownership.

Options trading is expected to lead to higher trading volumes and liquidity in the Ethereum market, benefiting portfolio diversification and trading strategies.

Additionally, arbitrage opportunities are anticipated as traders exploit price differences in Ethereum options across various platforms, further enhancing market liquidity.

Market makers may face pressure to hedge their positions, potentially creating a feedback loop that drives up Ethereum's price in the short term, especially as retail investors become more involved with ETH options.

Expert predictions suggest that options trading could bolster Ethereum's market position by attracting institutional investment and creating more hedging opportunities.

However, concerns remain due to Ethereum's smaller market cap compared to Bitcoin, which raises the risk of potential gamma squeezes that could increase price volatility.

Despite these positive developments, Ethereum's market confidence has declined, with its price falling 51.3% since the beginning of 2025 and the ETH/BTC ratio hitting a five-year low, indicating Bitcoin's growing dominance.

Following this approval, BlackRock's iShares Ethereum Trust (ETHA) became the first to list options, with trading commencing on April 10, 2025, and was soon joined by Grayscale Ethereum Trust (ETHE) and Bitwise Ethereum ETF (ETHW) on Cboe BZX.

Analysts, including Kadan Stadelmann, believe that Ethereum will struggle to surpass Bitcoin's dominance in the near term due to Bitcoin's established market position and perceived safety among investors.

Overall, while the approval of options trading is a positive step forward for Ethereum, it may not be sufficient to close the gap with Bitcoin, though it does enhance Ethereum's legitimacy in the digital asset space.