A significant development occurred on Friday, marking the accelerated 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.
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 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 is now on par with the offshore market. The rise of IBIT options is expected to embolden 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 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 the underlying asset at a predetermined price. 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, which allows investors to profit from BTC's implied volatility. The two markets, although now matching in scale, are positioned differently, 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.
The positioning in Deribit options is also concentrated on the higher side but is slightly more conservative. The average delta is lower in IBIT options, 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 have a longer investment horizon, with October 2026 expiries preferred in IBIT, while August expiries dominate on Deribit.
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. The rapid rise of IBIT options is striking, and while they may not be direct substitutes for Deribit, they cater to regulated, onshore investors accessing bitcoin exposure through traditional brokerage channels. As more participants become comfortable trading options via IBIT, it is expected to expand the market and increase sophistication and flow, ultimately benefiting venues like Deribit.