Wall Street Now Holds the Keys to Bitcoin Trading, Hedging, and Pricing
- How Is IBIT Reshaping Bitcoin Risk Evaluation?
- Why Are Traders Behaving Differently?
- Is Offshore Trading Losing Ground?
- What’s Holding IBIT Back?
- FAQs
What started as a niche market on offshore platforms is now dominated by institutional traders on regulated U.S. soil. Wall Street has taken the reins, and the "Bros" are using traditional tools to model, hedge, and price bitcoin just like any other asset. The iShares Bitcoin Trust (IBIT), with $86 billion in assets under management, has become the world’s largest Bitcoin fund. But the real story isn’t the fund itself—it’s the booming options market around it, which has grown so rapidly that traders are pushing regulators to lift trading limits. Open interest in IBIT options has more than tripled this year to $34 billion, with daily trading volume averaging $4 billion, outpacing most credit and emerging-market ETFs. Only the largest equity, gold, and small-cap ETFs trade more actively.
How Is IBIT Reshaping Bitcoin Risk Evaluation?
Rocky Fishman, founder of ASYM 500, noted, "It’s highly unusual for an ETF to develop an options market of this scale, let alone just eight months after launch." IBIT’s rapid growth has made it the primary venue for pricing Bitcoin risk in the U.S. Regulatory filings show institutional holders of IBIT have nearly doubled since December. Despite holding just over half the assets of the Bitcoin ETF group, IBIT sees more options trading than any of its peers. This isn’t just speculation—it’s risk management. Kevin de Patoul, CEO of market maker Keyrock, highlighted that institutional players avoided crypto options for years due to their offshore availability. Now, with onshore options and spot ETFs, institutions have the access they need to deploy familiar strategies. "They finally have an entry point that aligns with their playbook," he said.
Why Are Traders Behaving Differently?
Greg Magadini, Amberdata’s derivatives director, pointed out that the skew between IBIT call and put prices—even when Bitcoin isn’t rallying—suggests more investors are using puts to hedge against losses. This Flow naturally dampens volatility and prevents panic selling. The shift is also visible in trading patterns: U.S. hours now account for 57.3% of Bitcoin-dollar trades, up from 41.4% in 2021. Nearly half of Bitcoin spot trading volume flows through the twelve U.S.-listed ETFs, per FalconX research.
Is Offshore Trading Losing Ground?
Deribit, the dominant offshore derivatives exchange, remains relevant, but IBIT is closing the gap fast. For now, the two operate as isolated markets. Shi, Auros’ CEO, cited the lack of a unified clearing system and limited capital mobility as barriers to large cross-market trades. "Stablecoins could eventually bridge the gap," he added. Coinbase is already making moves, acquiring a stake in Deribit for $2.9 billion in May. Deribit CEO Luuk Strijers confirmed efforts to LINK platforms, which could enable shared collateral and multi-platform exposure accounts—reducing friction for larger trades.
What’s Holding IBIT Back?
IBIT’s rise has hit a regulatory wall. Its options position cap of 25,000 contracts, meant to curb risk, limits systematic strategies. A CBOE report noted this keeps risk exposure far below ETFs like MBTX and CBTX. In January, Nasdaq urged the SEC to remove the cap, with a decision expected by September. BlackRock’s digital asset lead, Robbie Mitchnick, predicts "a non-trivial increase in options volumes" if constraints ease. Even so, Wall Street hasn’t slowed down. Bitcoin is now treated like any other asset—exactly what it was meant to disrupt. "Eventually, all assets will be digital," said Keyrock’s Kevin. "What we call crypto will just be part of the financial system, priced and hedged like everything else."
FAQs
What makes IBIT’s options market unique?
IBIT’s options market has grown unusually fast, reaching $34 billion in open interest within eight months of launch—a rarity even among traditional ETFs.
How has institutional participation changed?
Institutional holders of IBIT have nearly doubled since December 2023, reflecting growing comfort with onshore Bitcoin exposure.
Why is trading volume shifting to U.S. hours?
With 57.3% of Bitcoin-dollar trades now occurring during U.S. hours (up from 41.4% in 2021), the market reflects Wall Street’s growing influence over crypto.
