A notable development occurred on Friday, marking a significant acceleration in the institutionalization of the bitcoin market, which has long been driven by individual investors. This shift is highlighted by 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 terms of open interest.
Notably, IBIT options have closed the gap with Deribit's bitcoin options market in just two years, despite Deribit's head start of operating since 2016. On Friday, the open interest in IBIT options contracts on Nasdaq 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 US's regulated, institutional-grade bitcoin investment and derivatives infrastructure is no longer secondary to the offshore market.
Furthermore, a thriving, regulated market in the US could encourage more Wall Street institutions to explore digital assets, ultimately leading to more mature price discovery. Sidrah Fariq, Deribit's Global Head of Retail Sales and Business, views IBIT's rise as a positive development for the broader crypto derivatives ecosystem, stating that it provides US retail investors with direct access to regulated leverage and options exposure. 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.
Although the two markets now match in scale, they differ in shape, revealing distinct trader sentiments. 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, roughly 41% higher than the current market price. In contrast, positioning in Deribit options is bullish but more measured, indicating expectations of a rally to $106,000. The onshore call open interest is concentrated further out-of-the-money than the offshore open interest, consistent with onshore flow being dominated by retail upside speculation and systematic call overwriting programs.
ETF holders tend to be more patient, with October 2026 expiries preferred in IBIT, while August expiries dominate on Deribit. Lastly, IBIT's implied volatility is higher than Deribit's, attributed 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 while it may rival Deribit in scale, the two are not direct substitutes, catering to different investor bases.