A notable development occurred on Friday, highlighting the accelerating 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 become slightly larger on Nasdaq than 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 six-year head start. On Friday, the dollar value of open IBIT options contracts on Nasdaq reached $27.61 billion, surpassing the $26.90 billion in Deribit's bitcoin options.
This milestone signifies that the regulated, institutional-grade bitcoin investment and derivatives infrastructure in the US has become a major player, rivaling 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 as a measure of 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. The covered call strategy, involving IBIT ETF and IBIT options, is a popular income-generating approach, allowing investors to profit from BTC's implied volatility. Although the two markets now match each other in scale, they differ in shape, 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. In contrast, Deribit options positioning 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, with the onshore average delta being slightly lower.
This suggests that onshore flow is 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-dated than those on Deribit. The implied volatility of IBIT is higher than that of Deribit's BTC options, which Volmex attributes to the structural quirk of ETF holders being unable to easily short bitcoin directly.
Overall, IBIT's rapid rise in the options market is striking, and it now appears to rival Deribit in scale. However, the two are not direct substitutes, as IBIT options primarily cater to regulated, onshore investors, while Deribit remains the go-to platform for global investors.