- The Bitcoin crash looks like a TradFi impulse surrounding BlackRock’s IBIT and the derivatives around it.
- There are three main theories with a large IBIT holder, a dealer hedging from structured IBIT products and a multi asset deleveraging reinforced by short gamma.
The Bitcoin crash on February 5th continues to generate widespread speculation about the true cause of one of the sharpest crashes in the market’s history. What is remarkable, however, is the clarity about the direction from which the crash originated. This time it doesn’t seem to be the typical scapegoats: no OG Bitcoin whales and no leverage squeeze on the futures market.
Three explanations are currently making the rounds. And they all end up with the same name: BlackRock’s Spot Bitcoin ETF.
Theory 1: A large holder of BlackRock’s Bitcoin ETF
Parker White (CIO, DeFi Dev Corp) looks at the raw numbers first. On February 5, IBIT’s daily turnover shot to a record level: $10.7 billion, almost double the previous peak. At the same time, around 900 million US dollars in option premiums were implemented, also an all-time high for IBIT.
As CNF reported, one point in particular makes Parker suspicious: Bitcoin and Solana fell almost in lockstep, even though SOL otherwise likes to play “beta” and not fall 1:1. And liquidations on typical crypto exchanges were “relatively low” in comparison. To White, this smacks of stress outside the usual crypto casino.
The trigger could be a large IBIT holder, perhaps a hedge fund that trades IBIT options and then ran into trouble. Parker points to the 13F reports, in which funds can be found that are almost entirely based in IBIT. This can concentrate margin risks: if it goes wrong, it goes really wrong. He also throws in a striking observation: many of these single-asset funds are based in Hong Kong.
His suspicion: An Asian hedge fund was completely liquidated after a gold/silver positioning also slipped into deep red (silver also fell sharply on February 5th). Thus, one or more non-crypto-native HK funds may have fallen into a balance sheet trap via leveraged, far out-of-the-money IBIT (“ultra high gamma”) calls, possibly with yen funding.
Theory 2: Dealer hedging due to structured IBIT products
Arthur Hayes (Ex-BitMEX CEO) is less about detective work, more about mechanics. His take: Banks and dealers may have sold Bitcoin or Bitcoin-like exposure to hedge risks from structured notes linked to spot Bitcoin ETFs like IBIT.
Hayes wrote via I will compile a complete list of all securities issued by banks to better understand the triggers for rapid price rises and falls. As the rules of the game change, you too must adapt.
Theory 3: Multi-asset deleveraging meets short gamma/basis trade
Jeff Park (CIO at ProCap, Bitwise advisor) has another Viewpoint. To him, the whole thing seems like a risk shock in the capital market that dragged Bitcoin into it, and then derivatives plumbing did the rest.
He also mentions IBIT as an anomaly but makes it clear: the imbalance was driven more by puts than by calls.
Another component comes from the prime brokerage environment: According to a note from Goldman’s PB, February 4th was one of the worst days for multi-strategy funds, a Z-score of 3.5, an event that occurs extremely rarely. When something like this happens, risk managers at pod shops don’t become sensitive. Then it’s time to de-gross, immediately, broadly, without much discussion. And that could explain why things got so ugly the following day.
Park highlights an anomaly that doesn’t fit well with a simple “ETF outflows” story. With a BTC drop of 13.2%, he would have expected historically significant net redemptions – more like $500 million to $1 billion.
Instead, IBIT saw net creations: around 6 million new shares, more than $230 million in additional AUM, and the rest of the ETF spectrum also had inflows. For Park, this is a signal: the move came more from the paper money complex – dealer/market maker/derivatives – than from a final capital withdrawal.
His theory is a cascade: Risk assets suddenly correlate at an unhealthy level → Multi-asset portfolios delever, including hedged BTC risks → Short gamma strengthens the move → Market makers have to sell IBIT or short BTC synthetically → Inventory builds up, and that dampens the outflows that one would have expected.
He cites the CME basis as an indication: the near-dated basis jumped from 3.3% on February 5th to 9% on February 6th. For him, this could mean that major players have forcibly exited the base trade.
Park is pretty clear about what he doesn’t believe: that this was just a continuation of old deprivations. And he also sees “holes” in the HK/JPY carry story. His main point is simpler: It doesn’t have to have been anything fundamental. It may have simply been the technical stuff – multi-asset de-risking, and then derivatives plumbing that reflexively escalates.
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