A significant development occurred on Friday, marking the acceleration of institutional involvement in 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 player.
Notably, IBIT options have bridged the gap with Deribit's bitcoin options market in just two years, despite Deribit's head start 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 regulated, institutional-grade bitcoin investment and derivatives infrastructure in the US has caught up with the offshore market, potentially encouraging more Wall Street institutions to explore digital assets and 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, 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, serving as a tool for hedging, speculation, and income generation. The open interest in options is a measure of market size and participation, with higher open interest indicating a deeper and more liquid market. 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.
The two markets, although matching in scale, differ in positioning, revealing distinct trader sentiments. According to Volmex, the bulk of open interest in IBIT call options is concentrated at strike levels equivalent to bitcoin trading around $109,709, while Deribit's call open interest is clustered around $106,000. The average delta is slightly lower for onshore flow, consistent with retail upside speculation and systematic call overwriting programs. Put positioning is largely aligned across venues, with open interest concentrated around the $63,500 strike.
Notably, IBIT options have a longer average expiry date, with October 2026 expiries preferred, compared to August expiries on Deribit. Lastly, IBIT's implied volatility is higher than Deribit's, attributed to the demand for put options from ETF holders seeking to hedge their positions.
Overall, IBIT's rapid rise in the options market is striking, rivaling Deribit in scale, but catering to regulated, onshore investors accessing bitcoin exposure through traditional channels.