More Paper Bitcoin!
Revisiting everyone's favourite topic; paper bitcoin. Except this time, we have a new, & very large player in the room, as options on IBIT have surpassed Deribit, becoming the dominant options market.
G’day Folks,
Back in October last year, I penned one of my favourite thought pieces to date, titled Paper Bitcoin, where I explored the role of derivatives in shaping modern Bitcoin market structure.
The thrust of the idea, is that whilst derivatives most certainly change the way Bitcoin prices behave, they are an unavoidable feature of maturation, and are arguably necessary if we expect large scale institutions to allocate capital to BTC.
Options serve the role as an ‘insurance market’, where investors can hedge both downside and upside risks, and transfer that risk to another party for a premium. Without a deep and liquid options market, it is difficult for large asset managers to allocate a sizeable proportion of their capital because they won’t be able to hedge out risks appropriately.
The reason I am bringing up options is we have a new player in town, and suffice to say, it has quickly become one of the more important developments in Bitcoin market structure of this cycle so far (and we have a long list of contenders).
I am of course talking about the options market which is being built on top of BlackRock’s IBIT ETF, and it is swelling in size at a rapid clip.
If we look at the BTC held within all of the spot ETFs, IBIT is the only one that has seen any meaningful increase this year, and the divergence started shortly after the options market went live in Nov-2024.
Today’s piece will be exploring IBIT’s option market, and the data demonstrating how big it has already become (and I’ve not seen anyone talking about it…yet).
📈 Reminder: you can find the charts from our articles on the Checkonchain Charting Website, and a guide in our Charts Tutorial Video.