Blockchain & Digital Assets Weekly Briefing - Week 41
- danae317
- Oct 10
- 14 min read
Week ending 10th October 2025
This week marks a defining moment in digital asset history — the institutional floodgates are truly open. Wall Street’s IBIT has overtaken Deribit, signaling a power shift in Bitcoin’s derivatives landscape as traditional finance asserts dominance. Meanwhile, Luxembourg’s sovereign wealth fund has officially entered the Bitcoin era, earmarking 1% of its reserves for the world’s leading digital asset — a symbolic yet seismic move for Europe’s financial hub.
Adding to the momentum, Morgan Stanley has greenlit crypto as a core component in multi-asset portfolios, while the NYSE’s parent company is betting $2 billion on Polymarket, a bold endorsement of blockchain-based prediction markets. Across the board, institutional investors are doubling down, with projections pointing to a surge in digital asset allocations by 2028.
From boardrooms to trading desks, the message is clear: crypto is no longer on the fringe — it’s becoming finance’s new frontier.
Wall Street’s IBIT surpasses Deribit: a new chapter in Bitcoin derivatives.
Luxembourg’s sovereign wealth fund enters Bitcoin era with a 1% allocation.
Morgan Stanley signals new era: crypto earns a seat in multi-asset portfolios.
NYSE owner commits $2 billion to crypto betting platform Polymarket.
Institutional investors double down: digital asset allocations set to surge by 2028.
Beyond the Brief
Wall Street’s IBIT surpasses Deribit: a new chapter in Bitcoin derivatives
BlackRock’s iShares Bitcoin Trust has overtaken Deribit in total notional Bitcoin open interest — signaling a migration of liquidity from crypto-native exchanges to regulated U.S. markets.
Bitcoin Options Market Share
According to the Cryptonomist, as of September 2025, the distribution of Bitcoin options open interest was approximately:
IBIT (Cboe-listed ETF options): 45%
Deribit: 41.9%
CME: ~6%
Other platforms: ~7%
The Milestone
BlackRock’s iShares Bitcoin Trust (IBIT) has become the world’s largest venue for Bitcoin derivatives exposure, surpassing Deribit in total notional open interest (OI).This marks the first time a regulated Wall Street product has eclipsed a crypto-native exchange in total Bitcoin options activity.
According to data from Bloomberg and CoinDesk, IBIT’s open interest reached roughly $38 billion, while Deribit’s stood near $32 billion — reversing years of dominance by the Panama-based derivatives platform.
“For the first time, more money is committed to Bitcoin options on Wall Street than on crypto’s own trading floors.”
What Is IBIT?
IBIT is a spot Bitcoin ETF launched by BlackRock in early 2024, allowing investors to gain direct exposure to Bitcoin via traditional brokerage accounts. Options tied to IBIT trade on Cboe, giving institutional investors a regulated way to hedge or express views on Bitcoin volatility.
Since its launch, IBIT has attracted sustained inflows and rapidly growing derivatives volume — driven largely by institutional participation.
What Is Deribit?
Founded in 2016, Deribit is the world’s largest crypto derivatives exchange, offering Bitcoin and Ethereum options and futures. It became the benchmark venue for Bitcoin options pricing, with its implied volatility data widely used across the industry. Most trading volume comes from crypto hedge funds, proprietary desks, and professional traders.
Despite losing the top spot in open interest, Coinbase Global Inc.'s Deribit platform remains a central liquidity hub in the global crypto derivatives market.
What Is Open Interest — and How Is It Measured?
Open Interest (OI) measures the total number of outstanding derivative contracts that have not been settled or closed. When expressed in notional terms, it captures the total dollar value of these open positions:
Notional OI = Contracts × Contract Size × Bitcoin Price
For instance, one option controlling 1 BTC at $65,000 equals $65,000 in notional exposure. Hundreds of thousands of such contracts make up the billions now open across both IBIT and Deribit.
Why It Matters: High open interest indicates deep liquidity, active participation, and strong capital commitment — key indicators of a mature derivatives market.
Why the Shift Matters
Regulated Liquidity Gains Ground
Deribit’s offshore base once made it the go-to venue for Bitcoin options. Now, IBIT’s success reflects the pull of onshore, regulated markets, attracting institutions bound by compliance, custody, and reporting standards.
Institutional Market Makers Step In
Firms like Jane Street, Citadel Securities, and Jump Trading are active in IBIT options. Their participation integrates Bitcoin risk into traditional market-making and hedging frameworks — bringing tighter spreads and more stable pricing.
Price Discovery Moves to the U.S.
For years, Deribit dictated the global Bitcoin volatility surface. With IBIT’s rise, Cboe-listed options may now set the tone for implied volatility and hedging costs, especially during U.S. trading hours.
Growing Interconnection with Traditional Finance
IBIT’s structure — backed by ETF shares — means hedging activity flows through CME futures, ETF units, and spot BTC markets. This creates stronger linkages between traditional and crypto trading infrastructure, but also potential cross-market contagion during stress events.
Liquidity Concentration and Volatility Effects
Larger, deeper markets often reduce noise and tighten spreads. However, as liquidity clusters around a few regulated venues, volatility shocks could travel faster between IBIT, CME, and global crypto exchanges.
The Bigger Picture
IBIT’s rise does not diminish Deribit’s role, but it highlights a deeper realignment: Bitcoin derivatives are no longer confined to the crypto ecosystem. They are now an active component of regulated financial markets, accessible through the same infrastructure that supports equities and ETFs.
As institutional capital continues to migrate toward compliant venues, Bitcoin’s market structure — and its volatility dynamics — will increasingly mirror those of mainstream asset classes.
Luxembourg’s sovereign wealth fund enters Bitcoin era with a 1% allocation
Luxembourg’s Intergenerational Sovereign Wealth Fund (FSIL) has made its first move into digital assets, allocating 1% of its portfolio to Bitcoin, according to an announcement by Finance Minister Gilles Roth during his presentation of the 2026 Budget at the Chambre des Députés. The update was later shared by Bob Kieffer, Director of the Treasury and Secretary General, in a LinkedIn post.
With this decision, Luxembourg becomes the first country in the European Union whose sovereign wealth fund has allocated part of its holdings to crypto assets, marking a milestone in the region’s gradual integration of digital assets into institutional investment strategies.
The move underscores Luxembourg’s reputation as one of Europe’s most stable and innovative financial centers, and reflects the growing institutional acceptance of Bitcoin as an emerging asset class. The investment was made under the FSIL’s new investment policy, approved by the government in July 2025, which expands the fund’s scope to include alternative assets for the first time.
A Modernized Investment Framework
The FSIL’s revised policy reflects both the fund’s growing maturity and Luxembourg’s evolving economic priorities. The government’s 2025 update rebalanced the portfolio by reducing bond holdings from 57% to 32%, increasing equities from 40% to 50%, and introducing a new 15% allocation for alternative investments.
This alternative investment pocket includes:
Private Equity (10%), with a focus on technology and defense sectors,
Real Estate (4%), aimed at supporting Luxembourg’s housing market, and
Crypto Assets (1%), primarily Bitcoin, recognized as an emerging asset class.
To mitigate operational risk, the fund’s Bitcoin exposure has been taken through a selection of exchange-traded funds (ETFs) rather than direct holdings.
A 3% liquidity reserve of the fund is also maintained to ensure flexibility and cash-flow management.
Long-Term Strategy and Fiscal Prudence
Established in 2014, the FSIL was created to preserve and grow wealth for future generations. It plays a stabilizing role within Luxembourg’s broader fiscal framework, enabling the country to respond to demographic and economic challenges over the long term.
Under current rules, the government can decide—no earlier than 2034 or once FSIL’s assets exceed €1 billion—to allocate up to 50% of the previous year’s income to the state budget. This ensures that the fund remains a long-term savings vehicle rather than a short-term financing tool.
Sustainable and Responsible Investing
Since 2020, the FSIL has followed a Socially Responsible Investment (SRI) and Environmental, Social, and Governance (ESG) framework. The updated 2025 policy strengthens this approach, integrating ESG criteria systematically across all asset classes, including equities, bonds, and—where feasible—alternative assets like crypto.
The inclusion of Bitcoin under this framework signals Luxembourg’s attempt to align digital asset exposure with sustainable investment principles, focusing on transparency, institutional-grade infrastructure, and long-term value creation rather than speculation.
Luxembourg’s Broader Economic Context
Luxembourg continues to rank among the most prosperous and stable economies in Europe, supported by a robust financial sector, prudent fiscal management, and a forward-looking approach to innovation. Its openness to blockchain, fintech, and digital finance has positioned the country as a hub for regulated digital asset activity within the European Union.
The FSIL’s Bitcoin allocation—though modest—illustrates how even traditionally conservative financial institutions are adapting to the digital asset landscape while maintaining a risk-managed, sustainable investment stance.
Looking Ahead
With the new policy enabling up to 15% in alternative investments, the FSIL has room to expand its exposure to digital assets, private equity, and real estate over time. These allocations will be introduced gradually, through partnerships with established institutional investors, in line with the fund’s mission to generate responsible, long-term returns.
Luxembourg’s move could also create a ripple effect across the European Union, encouraging other sovereign wealth funds and public investment vehicles to reassess their stance on digital assets. As regulatory clarity improves under frameworks like MiCA (Markets in Crypto-Assets Regulation), institutional participation in crypto may become more feasible across member states.
While each country’s fiscal strategy and risk appetite will differ, Luxembourg’s example demonstrates how a measured, ETF-based approach can serve as an entry point for governments seeking to balance innovation with prudence in a fast-evolving financial landscape.
Morgan Stanley signals new era: crypto earns a seat in multi-asset portfolios
Morgan Stanley’s Global Investment Committee (GIC) has formally recognized cryptocurrency — with a strong emphasis on Bitcoin — as a legitimate component of diversified investment portfolios; a move that underscores how digital assets have advanced from speculative instruments to mainstream financial tools.
"Bitcoin, which we consider scarce, akin to digital gold" stated the GIC report.
In a special report issued on October 1, 2025, the GIC recommended that financial advisors consider a 2–4% allocation to digital assets within multi-asset portfolios, according to a Yahoo Finance report and a tweet on X from Hunter Horsley, CEO of Bitwise.
The guidance carries significant weight: the GIC influences over 16,000 financial advisors and clients managing approximately $2 trillion in assets as part of Morgan Stanley’s Wealth Management division.
The Scope of Influence
While the GIC’s recommendations are advisory rather than directive, they often shape investment behavior across Morgan Stanley’s extensive client base. The firm’s total assets under management (AUM) stand at $7.7 trillion as of March 31, 2025. Of this, the $2 trillion managed by advisors is directly guided by the GIC’s outlook and strategies, whereas the remaining $5.7 trillion is overseen by the Investment Management division, which includes mutual funds, hedge funds, and institutional portfolios.
In practice, the GIC offers strategic direction—such as the recent crypto allocation suggestion—while advisors build individualized investment plans. Clients retain final decision-making power, ensuring a collaborative approach to portfolio construction.
Conservative Approach via ETPs
The GIC recommends a cautious and structured approach to cryptocurrency exposure. Advisors are guided to allocate digital assets primarily through ETPs (Exchange-Traded Products), which provide regulated, liquid, and easily tradable exposure to crypto. This conservative strategy allows investors to participate in the asset class while mitigating some of the operational and custody risks associated with direct cryptocurrency holdings.
Historical Parallels: From Tech to Crypto
Morgan Stanley’s latest endorsement of digital assets aligns with a pattern seen throughout its history. The GIC, or its predecessors, has previously identified major growth themes that the firm later adopted within its own investment operations:
Dot-Com Era (Late 1990s – Early 2000s): Morgan Stanley analysts were early advocates for internet companies, with figures like Mary Meeker championing firms such as Amazon and eBay. The firm later participated directly in IPOs and equity positions tied to the tech boom.
Artificial Intelligence (2010s – Present): GIC reports began highlighting AI as a transformative force in global markets around 2017. Morgan Stanley’s investment funds soon increased exposure to AI-driven companies, while the firm itself pursued fintech and AI integration through acquisitions and proprietary strategies.
Emerging Markets (2000s): The GIC recommended allocations to emerging economies like China and India, followed by Morgan Stanley launching dedicated funds and increasing exposure to these regions.
Real Estate and REITs (2000s – 2010s): Advisory emphasis on real estate diversification preceded Morgan Stanley’s expansion into property funds and REITs.
In each case, GIC guidance foreshadowed broader corporate participation in those asset classes — typically within one to two years of the advisory stance.
What It Means for Crypto
Given this track record, Morgan Stanley’s recognition of cryptocurrency as a viable portfolio component may signal a gradual shift toward institutional participation within its own $5.7 trillion investment management segment. Historically, GIC endorsements have served as early indicators of future capital flows and strategic positioning by the firm itself.
While the bank has not confirmed any direct allocations to crypto within its proprietary funds, its acknowledgment of digital assets as mainstream marks a notable turning point. For a sector long seeking validation from traditional finance, Morgan Stanley’s stance could accelerate broader adoption and integration of blockchain-based assets in diversified portfolios.
NYSE owner commits $2 billion to crypto betting platform Polymarket
Intercontinental Exchange Inc. (ICE), the parent company of the New York Stock Exchange (NYSE), the largest exchange company in the world by market capitalization, has announced plans to invest up to $2 billion in Polymarket, a blockchain-based prediction market platform. This strategic move is set to value Polymarket at approximately $8 billion before the investment. This makes its CEO, Shayne Coplan, the youngest self made billionaire tracked by the Bloomberg Billionaires Index.
Investment Details
The transaction is structured as an all-cash deal, with ICE acquiring a significant equity stake in Polymarket. The investment underscores ICE's interest in expanding its portfolio beyond traditional financial markets into the rapidly growing digital assets sector.
Polymarket’s Operations and Regulatory Context
The Ethereum Layer-2 operates as a decentralized platform that allows users to trade on the outcomes of various events, ranging from political elections to economic indicators. Participants use digital tokens to place bets, with the platform utilizing blockchain technology to ensure transparency and security.
Significantly, Polymarket has recently received formal approval from the U.S. Commodity Futures Trading Commission (CFTC) to resume operations in the United States. This comes more than three years after the platform was forced to suspend access to American users due to regulatory issues—a milestone highlighted in our September newsletter, click here to access it.
Political and Investor Ties
Polymarket has received funding from 1789 Capital before the 2024 presidential election, a venture firm backed by Donald Trump Jr., who has also joined the company as an adviser. Prior to ICE’s investment, Polymarket had raised at least $255 million, according to a Bloomberg report. Its investor base includes prominent figures such as Peter Thiel’s Founders Fund, Ethereum founder Vitalik Buterin, and Blockchain Capital.
Market Implications
This investment by ICE highlights the increasing convergence between traditional financial institutions and the digital asset ecosystem. It reflects a growing recognition of the potential for blockchain-based platforms to innovate within the financial services industry.
ICE’s move to acquire and integrate Polymarket could significantly broaden access to decentralized prediction market data. ICE will also begin distributing Polymarket data to thousands of financial institutions around the world, potentially enhancing liquidity, improving risk assessment, and accelerating institutional adoption of prediction market insights.
"ICE will also begin distributing Polymarket data to thousands of financial institutions around the world." said Shayne Coplan in a tweet announcing ICE investment.
Looking Ahead
As regulatory frameworks around digital assets continue to evolve, ICE's involvement with Polymarket may position the company to play a pivotal role in shaping the future of digital prediction markets. The partnership could also pave the way for further integration of blockchain technologies into mainstream financial operations.
Institutional investors double down: digital asset allocations set to surge by 2028
Institutional interest in digital assets is accelerating, according to State Street’s 2025 Digital Assets Outlook. The report finds that nearly 60% of institutional investors plan to increase their allocations to digital assets over the next year, with average exposure expected to double within three years.
As one of the world’s largest financial institutions—overseeing approximately $49 trillion in assets under custody and administration and $5.1 trillion in assets under management as of June 30, 2025—State Street’s findings provide a comprehensive view of how professional investors are approaching the evolving digital asset landscape.
Key insights from the report include:
Bitcoin exposure is expanding
Institutional managers were about twice as likely to allocate 2–5% of their portfolios to Bitcoin, and somewhat more likely to hold more than 5%.
Ethereum allocations are deepening
Managers were three times more likely than asset owners to have 5% or more of AUM invested in Ethereum.
Growth momentum is strong
Over a five-year horizon, 69% of respondents plan to increase digital-asset exposure, with 26% expecting substantial increases.
Tokenized assets dominate allocation share
While stablecoins and tokenized real-world assets (RWAs) currently make up the largest portion of digital-asset holdings, cryptocurrencies remain the primary source of portfolio returns.
Mainstream adoption expected within a decade
Most institutional investors anticipate that digital assets will become an established part of the financial system within ten years.
Despite this optimism, investors remain measured in their expectations. By 2030, just over half of respondents—around 52%—expect that 10–24% of total investments will be made through digital assets or tokenized instruments, while only 1% foresee digital assets becoming the dominant investment format. In other words, institutional adoption is advancing—but the industry is still in its early stages.
Beyond the Brief
Stablecoins supercharge the dollar: how Asia’s deposit flight fuels U.S. treasury demand
The Dollar’s Digital Momentum
Two new reports from JPMorgan and Standard Chartered suggest a single, powerful trend: the rise of stablecoins is strengthening the U.S. dollar’s global dominance while channeling capital out of emerging-market banks and into U.S. Treasuries.
As digital dollars spread through crypto rails, the implications extend beyond fintech. Analysts now see stablecoins as both a new conduit for dollar liquidity and a catalyst for shifting global capital flows.
JPMorgan: Stablecoins Could Add $1.4 Trillion in Dollar Demand
JPMorgan estimates that if current growth continues, the stablecoin market could reach $2 trillion by 2027, up from around $260 billion today. Because 99% of stablecoins are pegged to the U.S. dollar, that expansion would translate directly into new dollar demand—potentially up to $1.4 trillion, according to the bank.
Most issuers hold their reserves in short-term U.S. Treasuries and cash, meaning each dollar-backed token effectively increases foreign appetite for U.S. debt. In practical terms, stablecoin adoption abroad deepens dollar usage and broadens the investor base for U.S. government securities.
Standard Chartered: $1 Trillion Could Leave Emerging-Market Banks
Standard Chartered’s analysis complements that view but highlights the other side of the flow. The bank forecasts that over the next three years, as much as $1 trillion in deposits could move from emerging-market banks—many in Asia—into stablecoins.
The shift is driven by savers in countries with weaker or volatile currencies—such as India, Indonesia, Vietnam, and the Philippines—seeking dollar stability through digital tokens. For many households and businesses, stablecoins offer what local banking systems cannot: instant access to dollar-denominated assets and protection from currency depreciation.
By 2028, Standard Chartered expects stablecoin holdings in developing economies to reach $1.2 trillion, up from about $173 billion today. That represents both a loss of domestic liquidity for emerging banks and a gain for U.S. dollar-based assets.
The Mechanics: From Local Deposits to U.S. Treasuries
Every time a user converts local currency into a dollar-pegged stablecoin, capital effectively leaves the local banking system and re-enters the U.S. financial ecosystem. Stablecoin issuers—whether regulated in the U.S. or offshore—hold reserves in U.S. Treasuries, reverse repos, or bank deposits, reinforcing demand for U.S. government debt.
Importantly, stablecoins linked to the U.S. dollar account for roughly 99% of all stablecoins in circulation, meaning the vast majority of global stablecoin activity channels funds into dollar-denominated assets.
In aggregate, this process links digital asset adoption directly to funding flows into the U.S. Treasury market, even as it draws liquidity away from emerging-market banking systems.
Policy and Market Implications
For emerging economies: Policymakers face a new vector for capital outflows and dollarisation, potentially complicating exchange-rate and monetary policy.
For the U.S.: Stablecoins may inadvertently bolster Treasury demand, supporting dollar liquidity even as global “de-dollarisation” discussions persist.
For investors: The growth of on-chain dollar liquidity could tighten the connection between crypto markets and traditional money markets.
Both banks stress that while stablecoin growth is not guaranteed, the structural incentives—yield, stability, and global accessibility—remain powerful drivers.
Whether viewed through JPMorgan’s projection of $1.4 trillion in added dollar demand or Standard Chartered’s warning of $1 trillion in emerging-market deposit flight, the conclusion converges: Stablecoins are amplifying the gravitational pull of the U.S. dollar and deepening the link between digital assets and U.S. Treasuries.
WHAT WE ARE READING (OR WATCHING)
The Stablecoin Standard
European Commission says existing rules address stablecoin risks
Governance Watch
Crypto Helped Get Trump Elected. Now It’s Wooing UK’s Farage
BOE Plans Carveouts on Stablecoin Cap After Industry Backlash
The Onboarding Wave
BNY Explores Tokenized Deposits as Blockchain Payments Catch On
On the Launchpad
CME Group to Offer Around-the-Clock Trading for Cryptocurrency Futures and Options
Beyond the Chain
Ray Dalio on Gold Prices, Fed Interest Rates, Trump's Trade Policy
Citadel’s Griffin Calls Rush to Gold as Safer Asset ‘Concerning’
This article is for informational purposes only and should not be considered financial advice. Please do your own research or consult a licensed financial advisor before making investment decisions.
