A notable development occurred on Friday, highlighting the accelerating 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 Deribit, a major offshore platform.
In just two years, IBIT options have closed the gap with Deribit's bitcoin options market, which has been operating since 2016. On Friday, the dollar value of open IBIT options contracts on Nasdaq, known as open interest, reached $27.61 billion, slightly higher than Deribit's $26.90 billion, 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. A thriving, regulated market in the US could encourage more Wall Street institutions to explore digital assets, leading to more mature price discovery.
Deribit's Global Head of Retail Sales and Business, Sidrah Fariq, views IBIT's rise as a positive development for the broader crypto derivatives ecosystem. 'US retail can't 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 to measure 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 from 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, though similar in scale, differ in shape, revealing trader sentiment.
According to Volmex, the bulk of open interest in IBIT call options is concentrated at strike levels equivalent to bitcoin trading around $109,709. Positioning in Deribit options is also concentrated on the higher side but is slightly more conservative. 'Onshore call OI is concentrated roughly 4 percentage points further out-of-the-money than offshore, and the onshore average delta is slightly lower,' Volmex noted.
Put positioning is largely aligned across venues, with open interest concentrated around the $63,500 strike. ETF holders tend to be more patient, with options expiry dates indicating a preference for October 2026 expiries in IBIT, while August expiries dominate on Deribit. 'IBIT options are approximately two months longer-dated on an OI-weighted basis,' Volmex observed.
Lastly, IBIT's implied volatility is higher than Deribit's, which Volmex attributes to a structural quirk: ETF holders cannot easily short bitcoin directly, so they buy put options as their only available hedge. This demand for put options is keeping IBIT's implied volatility slightly elevated. Overall, IBIT's rapid rise in the options market is striking, and it now appears to rival Deribit in scale.
However, the two are not direct substitutes, as IBIT options primarily cater to regulated, onshore investors accessing bitcoin exposure through traditional brokerage channels, while Deribit remains the go-to platform for global investors. 'I don't see this as competition. If anything, it expands the market. As more participants get comfortable trading options via IBIT, it ultimately feeds into the broader ecosystem, and venues like Deribit benefit from increased sophistication and flow,' Fariq said.