A significant development occurred on Friday, marking the accelerated institutionalization of the bitcoin market, which has long been driven by individual investors. 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. Notably, IBIT options have closed the gap with Deribit's bitcoin options market in just two years, despite Deribit's head start since 2016. On Friday, the open interest (OI) of IBIT options contracts on Nasdaq reached $27.61 billion, exceeding Deribit's bitcoin options by $0.71 billion, according to data from Volmex.
This milestone signifies that the regulated, institutional-grade bitcoin investment and derivatives infrastructure in the US is now on par with the offshore market. The rise of a booming, regulated market in the US may 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, providing 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 an 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 on coin or ETF holdings. One popular income-generating strategy involving IBIT ETF and IBIT options is the covered call strategy, allowing 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, reveal differences in 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, or roughly 41% above the current price.
In contrast, Deribit options positioning is more conservative, with call open interest clustered around levels equivalent to approximately $106,000 in BTC terms. 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.
Put positioning is largely aligned across venues, with open interest concentrated around the $63,500 strike. ETF holders tend to be more patient, with IBIT options expiries averaging two months longer than those on Deribit. Lastly, IBIT's implied volatility is higher than Deribit's, attributed to the demand for put options from ETF holders who cannot easily short bitcoin directly.
The rapid rise of IBIT 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. According to Fariq, the growth of IBIT options expands the market, increasing sophistication and flow, and ultimately benefiting venues like Deribit.