- The current crypto market collapse has dragged down the Bitcoin price, but paradoxically triggered an unprecedented boom in the derivatives market. Particular focus is on BlackRock’s spot Bitcoin ETF, whose options trading achieved record turnover.
- Bitcoin fell by double digits, but over two million IBIT options were traded – leaving even experts speechless. Since then there have been two factions. One says the heavy options trading was a response to the crash, the other says the options market itself caused the crash.
The CoinDesk report that began the current debate describes a trading day that has never before been observed in this form. The BlackRock ETF IBIT recorded an all-time high in options volume, while at the same time the ETF price and the Bitcoin spot price came under massive pressure.
What was particularly noticeable was the dominance of put options, which indicates a wave of hedging by institutional investors. The unusually high premiums and strong demand for protection instruments suggest that major market participants saw significant risks.
At the same time, the structure of the options traded suggests that not only classic hedging strategies were in play. Several analysts point to the Role of market makerswho have to adjust their delta hedges when prices fall sharply. This mechanism can increase selling pressure if traders are forced to sell additional futures or spot positions to stabilize their balance sheets.
Causes dispute in full swing
The interpretations could hardly be further apart: BitMEX founder Arthur Hayes argues that structured products on Bitcoin ETFs played the central role. Banks that issue such products must adjust their hedging in response to certain price movements. If the market slips into a negative gamma zone, this can lead to a self-reinforcing downward spiral. Hayes sees this rare mechanism as the cause of the crash.
Other analysts disagree: The crash had already begun and options activity was simply a response to increased volatility. Ergo, the record sales are a symptom, not the trigger. There were simply too many investors who sought protection at the same time when the market came under pressure.
A third, albeit much smaller, group points to external factors, particularly leveraged funds from Asia. They built up large positions using cheap yen financing, which had to be liquidated when financing costs rose and prices fell. The resulting margin calls may have increased selling pressure.
What the case reveals about the new market structure
Regardless of the reason, the incident shows how much the BTC market structure has been changed by the introduction of large spot ETFs. The options market surrounding these products is no longer a fringe phenomenon, but a powerful element in price formation. The combination of structured products, delta hedging and global carry trades makes the market more vulnerable than before to abrupt movements – and at the same time increases the importance of the derivatives market as an early warning system.
The crash and the record sales in IBIT options trading are therefore a turning point. It shows that Bitcoin has long since arrived at the center of complex institutional strategies – and that these strategies can significantly influence the market in both directions.
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