A significant development occurred on Friday, highlighting the rapid institutionalization of the bitcoin market, which has long been driven by individual investors. This shift 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 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 indicates that the US is no longer secondary to the offshore market in terms of regulated, institutional-grade bitcoin investment and derivatives infrastructure. The 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 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.
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, though similar in scale, differ in shape, 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. Positioning in Deribit options is more conservative, with call open interest clustered around levels equivalent to roughly $106,000 in BTC terms. The onshore call open interest is concentrated roughly 4 percentage points further out-of-the-money than offshore, consistent with onshore flow being dominated by retail upside speculation. 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 approximately two months longer-dated than in Deribit. Lastly, 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.
Overall, IBIT's rapid rise in the options market is striking, rivaling Deribit in scale, and is expected to expand the market, increasing sophistication and flow.