A notable development occurred on Friday, highlighting the rapid institutionalization of the bitcoin market, which has been driven by individual investors for years. This is evident in the growth of options linked to BlackRock's bitcoin exchange-traded fund (ETF), IBIT, which have surpassed the total bitcoin options trading on the offshore platform Deribit. In just two years, IBIT options have bridged the gap with Deribit's bitcoin options market, which has been in operation since 2016. On Friday, the dollar value of open IBIT options contracts on Nasdaq, also known as open interest, reached $27.61 billion, slightly exceeding the $26.90 billion in Deribit's bitcoin options, according to data from Volmex.
This milestone signifies that the regulated, institutional-grade bitcoin investment and derivatives infrastructure in the US is no longer secondary to the offshore market. The rise of a booming, regulated market in the US could encourage more Wall Street institutions to explore digital assets, ultimately leading to more mature price discovery. Deribit's Global Head of Retail Sales and Business, Sidrah Fariq, views IBIT's growth as a positive development for the broader crypto derivatives ecosystem.
'US retail cannot easily access platforms like Deribit, so iShares Bitcoin Trust (IBIT) options provide them with direct access to regulated leverage and options exposure,' Fariq stated. Options are derivative contracts that grant the purchaser the right to buy or sell the underlying asset at a predetermined price at a later date. Analysts use open interest as a measure of market size and participation, with higher open interest indicating a deeper and more liquid market.
Traders utilize options to hedge existing positions, speculate on price direction, and generate income on coin or ETF holdings. One popular income-generating strategy involving IBIT ETF and IBIT options is the covered call strategy, which allows investors to profit from BTC's implied volatility by holding the ETF and shorting IBIT calls at levels above the ETF's current market price. The two markets, although now matching in scale, are positioned differently, revealing insights into trader sentiment. According to Volmex, the majority of open interest in IBIT call options suggests expectations of an ETF rally to levels equivalent to BTC trading at $109,709 in the near term, approximately 41% higher than the current market price.
In contrast, positioning in Deribit options is bullish but slightly more measured, indicating expectations of a rally to $106,000. The average delta of onshore call options is slightly lower, consistent with onshore flow being dominated by retail upside speculation and systematic call overwriting programs. ETF holders tend to be more patient, with options having expiry dates and analysis suggesting that October 2026 expiries are preferred in IBIT, while August expiries dominate on Deribit.
Lastly, IBIT's implied volatility is higher than the implied volatility derived from Deribit's BTC options, which Volmex attributes to a structural quirk where ETF holders cannot easily short bitcoin directly, leading to increased demand for put options. Overall, IBIT's rapid rise in the options market is striking, and the two markets are not direct substitutes, as IBIT options cater to regulated, onshore investors, while Deribit remains the go-to platform for global investors.