A significant development occurred on Friday, marking the accelerating institutionalization of the bitcoin market, which has long been driven by individual investors. This is evident in the fact that options linked to BlackRock's bitcoin exchange-traded fund (ETF), IBIT, have grown to surpass the 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 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 signifies that the regulated, institutional-grade bitcoin investment and derivatives infrastructure in the US is now on par with the offshore market. The growth of a booming, regulated market in the US could 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, stating that it provides US retail investors with direct access to regulated leverage and options exposure. Fariq notes that the current macro environment, marked by supply chain uncertainty, energy shocks, and geopolitical risks, naturally drives demand for hedging and options strategies.
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 employ 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 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 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, 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. The average delta is slightly lower onshore, 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.
Notably, IBIT options are approximately two months longer-dated on an OI-weighted basis, suggesting that ETF holders are more patient and have a longer investment horizon. 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 and instead buy put options as a hedge. The demand for put options is keeping IBIT's implied volatility slightly elevated.
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. Fariq views this development as an expansion of the market, stating that it will ultimately feed into the broader ecosystem and benefit venues like Deribit.