Bitcoin Volatility Shifts to U.S. Equity Options Markets

The emergence of U.S. spot bitcoin ETFs has introduced a new dynamic to the cryptocurrency market, with a significant portion of bitcoin volatility now being driven by U.S. equity options markets.

Historically, offshore perpetual futures were the primary driver of bitcoin's price action and hedging flows. However, with the launch of U.S. spot bitcoin ETFs, investors have begun to buy calls and puts on these vehicles, which has led to a shift in how volatility is transmitted.

The increased use of IBIT options has resulted in dealers selling optionality and hedging delta exposure, creating a procyclical effect that can amplify underlying price movements. This dynamic has been further exacerbated by the fact that IBIT holds physical bitcoin, allowing arbitrage and creation-redemption flows to transmit ETF positioning into the underlying market.

As a result, bitcoin is increasingly participating in the same balance sheet and derivatives mechanics that govern equities and other risk assets. This evolution complicates the 'digital gold' narrative, which posits that bitcoin's correlation with gold is stable and close to zero over shorter horizons.