A notable development occurred on Friday, indicating the rapid growth of institutional involvement in the bitcoin market, an area previously dominated by individual investors. This shift is evident in the options market, where instruments tied to BlackRock's bitcoin exchange-traded fund (ETF), IBIT, have gained significant traction on Nasdaq, surpassing the total bitcoin options trading on Deribit, a major offshore player. The fact that IBIT options have bridged the gap with Deribit's bitcoin options market in just two years is particularly striking, given that Deribit has been operating since 2016.
On Friday, the open interest (OI) 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, a decentralized crypto volatility protocol. This milestone signifies that the regulated, institutional-grade bitcoin investment and derivatives infrastructure in the US is now on par with the offshore market, potentially encouraging more Wall Street institutions to explore digital assets and leading to more mature price discovery. Sidrah Fariq, Deribit's Global Head of Retail Sales and Business, 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 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 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 now matching in scale, reveal different trader sentiments, with the bulk of open interest in IBIT call options concentrated at strike levels equivalent to bitcoin trading around $109,709, roughly 41% above the current price. In contrast, Deribit options positioning is more conservative, with call open interest clustered around levels equivalent to roughly $106,000 in BTC terms.
The average expiry dates for IBIT options are also longer, with October 2026 expiries preferred, whereas August expiries dominate on Deribit. Lastly, IBIT's implied volatility is higher than Deribit's, attributed to a structural quirk where ETF holders, unable to easily short bitcoin directly, buy put options as a hedge, keeping IBIT's implied volatility slightly elevated. Overall, IBIT's rapid rise in the options market is significant, now rivaling Deribit in scale, but 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.