A notable development occurred on Friday, marking 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 the offshore platform Deribit.
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, also known as open interest, reached $27.61 billion, slightly higher than 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, 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 give 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 use 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.
The two markets, though similar in scale, differ in positioning, revealing distinct 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, while Deribit options are more conservative, with call open interest clustered around levels equivalent to roughly $106,000 in BTC terms. Put positioning is largely aligned across venues, with open interest concentrated around the $63,500 strike. ETF holders tend to be more patient, with average expiry dates in IBIT options preferred in October 2026, compared to August expiries on Deribit.
Lastly, IBIT's implied volatility is higher than the implied volatility derived from Deribit's BTC options, 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.
According to Fariq, the growth of IBIT options expands the market, increasing sophistication and flow, and ultimately benefiting venues like Deribit.