A significant 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 Deribit, a major offshore platform. Notably, IBIT options have bridged the gap with Deribit's bitcoin options market in just two years, despite Deribit's six-year head start. On Friday, the open interest in IBIT options contracts on Nasdaq reached $27.61 billion, exceeding 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 is now on par with the offshore market. Furthermore, a thriving, regulated market in the US could encourage more Wall Street institutions to explore digital assets, ultimately leading to more mature price discovery.
According to Sidrah Fariq, Deribit's Global Head of Retail Sales and Business, IBIT's rise is a net positive for the broader crypto derivatives ecosystem, as it provides 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 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 additional 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 simultaneously holding the ETF and shorting IBIT calls at levels above the ETF's current market price.
The two markets, though 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, or roughly 41% above the current price.
In contrast, Deribit options positioning is slightly more conservative, with call open interest clustered around levels equivalent to roughly $106,000 in BTC terms. Volmex notes that 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 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. 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, and while it may rival Deribit in scale, the two are not direct substitutes, catering to different investor bases and market needs.