Fortune) What caused the Bitcoin crash? The bankruptcy of a Hong Kong hedge fund is being pointed to as a clue.
Key Hypothesis: The 'Perfect Storm' of Hong Kong Hedge Funds
This theory, proposed by former stock trader Parker White, is currently considered the most persuasive cause.
1. Excessive 'Leverage' Betting
Some Hong Kong hedge funds placed huge bets on 'call options' (the right to buy at a specific price in the future) on BlackRock's Bitcoin spot ETF, IBIT. They focused particularly on risky options (out-of-the-money call options) that could pay off handsomely if the price rose significantly.
2. Backlash from the Yen Carry Trade
To raise investment funds, they utilized the 'yen carry trade,' borrowing low-interest yen and investing. However, recent fluctuations in the yen's value and rising funding costs have led to a funding squeeze.
3. Losses in the Silver Market
To make matters worse, these funds appear to have also suffered significant losses in the recently volatile silver market. While waiting for a Bitcoin rebound, they desperately needed funds to cover losses elsewhere.
4. Chain Reaction of Forced Liquidations
When the Bitcoin price unexpectedly declined, the value of the funds' collateral declined, ultimately leading to forced liquidations. The massive amount of IBIT (Bitcoin ETF) holdings held by these funds were then dumped into the market, causing a sharp decline in the Bitcoin price.
5. Why Was This Not Known Beforehand?
Usually, rumors of a cryptocurrency market crisis first circulate through platforms like Crypto Twitter. However, because the Hong Kong hedge funds traded through ETFs in the US stock market, not through coins, they remained under the radar of the existing cryptocurrency community.
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