After Bitcoin plummeted from its peak to the $60,000 range, various conspiracy theories emerged in the community: some said it was due to institutional collapse, some said it was due to market manipulators taking profits, and others pointed the finger at regulatory agencies for covert suppression.
However, BitMEX co-founder Arthur Hayes gave a calm, almost boring answer this morning (8th): Stop looking for scapegoats. The market crash wasn't some secret conspiracy; it was the law of leverage at work. When prices go up, derivatives make you earn more; when prices go down, derivatives make you lose faster. That's all.
He then added, "Fortunately, there was no government bailout, so we were able to quickly clean up the excessively leveraged investors and restore a situation where prices only rise and never fall!"
IBIT Structured Products: Wall Street's "Passive Weapon"
In an earlier analysis, Hayes proposed a more comprehensive explanatory framework, pointing the finger at BlackRock's iShares Bitcoin Trust (IBIT) and related structured financial products.
His logic is as follows: Wall Street banks issued a large number of structured notes linked to IBIT, allowing traditional investors to gain price exposure to Bitcoin without directly holding it. As the issuers of these products, banks need to maintain "Delta neutrality": that is, regardless of whether Bitcoin rises or falls, the banks themselves do not bear directional risk.
The problem lies in "dynamic hedging." When the price of Bitcoin plummets, banks must sell Bitcoin or Bitcoin-related derivatives to rebalance their exposure. This mechanical selling pressure, combined with existing selling in the market, further depresses prices, triggering more hedging sell orders and creating a self-reinforcing downward spiral.
In other words, IBIT structured products are like a "passive-kill weapon" that Wall Street has installed in the crypto market: it doesn't fire on its own, but automatically dumps additional selling pressure once market volatility triggers a threshold. Hayes points out that the same mechanism works in reverse when prices rise, as banks need to buy Bitcoin to maintain hedging, thus amplifying the upward trend.
This is the true meaning of his "two-way amplification." It's not some shady operator pressing buttons, but rather the mechanical operation of the structural features of financial engineering.
Both sides of the magnifying glass will be used.
In the short term, however, investors face the reality that both sides of the magnifying glass will be used. The same derivative structure and ETF hedging mechanism, which accelerated the collapse during a downturn, will also accelerate the rebound when market sentiment reverses. The only question is: where will the reversal be triggered?
Next week, the US will release its delayed January non-farm payrolls report and CPI data, which will directly impact market expectations regarding the Federal Reserve's policy path. If the data is dovish, the pressure from investors may quickly ease; if the data is hawkish, the deleveraging process may not yet be complete.
Hayes's words are essentially telling the market: don't be held hostage by fear narratives. Derivatives are not monsters, and leverage cleansing is not the end of the world; it's just a machine doing its job.
As for his prediction that the market will return to a state of "only rising and never falling"... just take it as a reference. The most important thing is to manage your own risk.
