The Early Days of Crypto Options Trading
Before 2019, crypto derivatives were almost entirely concentrated in spot margin and perpetual futures. Options trading was fragmented and illiquid. Deribit transformed the sector by introducing European-style cash-settled options with real-time portfolio margin systems and dynamic risk engines.
The 100%+ IV Regime:
During 2018–2019, Bitcoin 30-day Implied Volatility routinely traded between 80% and 140%. Systematic option sellers captured outsized premiums by underwriting out-of-the-money puts and calls against cash reserves.
How Delta Hedging Began Influencing Spot Markets
As options open interest grew beyond $1 billion, institutional market makers began dynamically hedging their 'gamma' exposure in the spot and perpetual swap markets. This created the first observable 'pinning' behavior, where spot price consolidated toward high open interest strikes on the final Friday of each month.
Practical Takeaways for Modern Traders
- Track Deribit total Open Interest to gauge institutional participation and potential expiration day volatility dampening.
- Use historical volatility vs. Implied volatility (IV Rank) to determine whether option contracts are overpriced or underpriced.