When ETF options start driving bitcoin

CoinDesk

by Gregory Mall

February 25, 2026

AI-Generated Deep Dive Summary

The rise of U.S. spot Bitcoin ETFs has triggered a significant shift in how bitcoin volatility is transmitted across markets. According to Gregory Mall, Chief Investment Officer at Lionsoul Global, the rapid growth of IBIT (iShares Bitcoin Trust ETF) options has moved a substantial portion of bitcoin's convexity into U.S. equity options markets, altering traditional dynamics tied to offshore crypto venues. Prior to the introduction of these ETFs, bitcoin volatility was primarily influenced by offshore perpetual futures, where funding imbalances and leverage-driven activity shaped price movements. However, with the emergence of IBIT options, a different mechanism has taken hold. Investors now trade calls and puts on IBIT, forcing dealers to hedge their delta exposure. When investors are net long options, dealers often end up short gamma, leading them to buy bitcoin when prices rise and sell when they fall—a procyclical process that can amplify market moves. This shift matters because it connects the traditionally volatile crypto market with more regulated equity markets. Bitcoin's price movements now interact with broader macroeconomic factors through these ETF options, creating new feedback loops between crypto and traditional finance. For instance, during periods of low volatility, sustained option buying by investors leaves dealers short convexity across both ETF and offshore markets. When spot prices break a trend—whether up or down—the resulting hedging flows can intensify market movements. The data shows a clear correlation between IBIT options volume and Bitcoin's U.S.-hour realized volatility. Regression analysis confirms that even after controlling for broader macroeconomic factors like BTC funding rates, equity returns, and the VIX, IBIT options activity remains a significant driver of bitcoin volatility. This structural change underscores how traditional financial instruments are reshaping crypto markets, bringing new risks and opportunities to both participants. For

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Originally published on CoinDesk on 2/25/2026