Bitcoin experienced its most dramatic sell-off this week since the FTX crash, with the price briefly falling below $61,000, a drop of more than 52% from its all-time high of $126,000 last October. Amidst the spreading market panic, several prominent figures have stepped forward to analyze the "real culprit" behind this collapse.
These criticisms are all directed at BlackRock's IBIT , the world's largest Bitcoin spot ETF, and the complex structured products and options trading built around it.
Arthur Hayes: IBIT hedging could be the trigger for a sharp drop
BitMEX co-founder Arthur Hayes posted on social media that his initial assessment is that the BTC crash may stem from traders' hedging activities with IBIT structured products . He pointed out that since the listing of the Bitcoin ETF, numerous Wall Street investment banks and hedge funds have created various derivatives and structured notes around IBIT.
Hayes explained that one of the core strategies of these institutions is "basis trading," which involves buying IBIT as collateral while simultaneously short CME Bitcoin futures to earn an annualized risk-free spread of approximately 7% to 10% . However, when the futures basis contracts sharply, this trade must be liquidated, requiring the sale of ETFs and the covering of short futures positions, instantly reversing the original net inflow into a large-scale outflow.
These hedge funds never bought IBIT out of bullishness on Bitcoin; they simply wanted to earn a few percentage points above the federal funds rate. When the basis disappeared, they wouldn't hesitate to sell. — Arthur Hayes
Hayes stated that he will subsequently compile a systematic list of all IBIT-related notes issued by major banks in order to more clearly identify key triggers that may cause drastic fluctuations in the price of the coin.
Parker White: Hong Kong hedge funds are the real "hidden bombs".
Parker White, Chief Investment Officer and Chief Operating Officer of DeFi Dev Corp (NASDAQ: DFDV), offered a more specific speculation. In a social media post, he suggested that the volatility likely originated from large holders of IBIT, possibly one or more non-crypto hedge funds headquartered in Hong Kong.
He pointed out several key clues:
Single-asset fund structure: Some funds have extremely high holdings in IBIT, even operating as "single-asset funds" to isolate margin risk. This means that if the price of IBIT falls sharply, the entire fund will face a devastating blow, with no other assets to buffer it.
High-leverage options strategy: After Bitcoin's decline last October, these funds bought large amounts of out-of-the-money call options, betting on a rapid price rebound. Data shows that IBIT options trading volume surged to a record 2.33 million contracts on the day of the crash, with option premiums reaching $900 million. This was seen as a clear signal of massive forced liquidation.
Yen carry trades accelerated unwinding: White speculates that these Hong Kong funds used yen carry trades to finance their IBIT option positions. When the yen appreciated and carry trade costs rose, the financing side came under pressure first, forcing the funds to accelerate unwinding their positions.
The ripple effects of the silver price crash: Adding insult to injury, the recent 20% plunge in the silver market further impacted these funds' cross-asset positions, exacerbating overall deleveraging pressure. With multiple negative factors converging, the funds' leveraged positions were gradually eroded, and ultimately, the continued decline in Bitcoin completely wiped out their remaining holdings.
A sharp drop in silver prices, the unwinding of yen carry trades, and the liquidation of IBIT options positions = a perfect storm. Multiple pressures erupted simultaneously, ultimately making Bitcoin a victim of this deleveraging spiral.
IBIT's "surrender sell-off" sets multiple historical records.
The data confirms the plausibility of the above speculation. During the crash on February 5th and 6th, IBIT set several historical records since its listing:
- Single-day trading volume: Exceeded $10.7 billion (284 million shares), the highest since its listing, far exceeding previous records.
- Options premiums: $900 million in a single day, a record high, suggesting that large holders were forced to close their positions at extremely unfavorable prices.
- Market-wide liquidation: The cryptocurrency market saw a staggering $2.6 billion in liquidations within 24 hours, with long positions accounting for the vast majority.
- Realized net loss: Bitcoin has realized a net loss of $3.2 billion in a single day, surpassing all historical black swan events such as the FTX crash, LUNA going to zero, 519 and 312, setting a new record.
Several market analysts pointed out that such astonishing trading volume and options activity could hardly be explained by ordinary "market panic" unless it was due to forced liquidation by large institutions.
Controversy remains
However, not everyone agrees with the claim that "Hong Kong hedge funds have been wiped out." Another view holds that these unusual fund flows are more likely to reflect widespread market panic and routine risk management , rather than a catastrophic collapse of a single institution.
Skeptics point out that there are currently no regulatory filings that directly confirm the liquidation of a specific fund. In the history of the crypto market, there have indeed been cases where large players have fallen in secret, and their identities have remained unconfirmed.
Those who support the "fund liquidation" theory countered that IBIT's record-breaking single-day trading volume of $10.7 billion, option premiums of $900 million, and the significant increase in open interest after Nasdaq removed option limits on January 21, 2026, all point to heavyweight players being eliminated by the market.
