According to Odaily Odaily, Bitwise consultant Jeff Park published an article reviewing the sharp drop in Bitcoin and the crypto market on February 5th, arguing that the volatility was more likely triggered by risk mitigation in the traditional financial system and derivatives mechanisms, rather than by the fundamentals of the crypto industry itself or a single "black swan" event.
Jeff Park pointed out that Bitcoin ETFs, especially IBIT, saw record trading volumes and options activity that day, with options trading clearly dominated by bearish positions. Meanwhile, Bitcoin's price movements had been highly correlated with risk assets such as software stocks in previous weeks. February 4th was marked by Goldman Sachs' prime brokerage (PB) division as a day of extreme drawdown for multi-strategy funds, subsequently requiring rapid and indiscriminate deleveraging for risk management purposes. This process impacted Bitcoin-related positions and further amplified the decline on February 5th.
He analyzed that although the price fell by more than 13% within two days, and the market originally expected a large-scale outflow of ETF funds, the actual data showed that the Bitcoin ETF as a whole recorded net subscriptions, with IBIT adding about 6 million shares, increasing its size by more than $230 million. This indicates that the selling pressure mainly came from "paper money" and non-directional transactions related to hedging and market making, rather than the withdrawal of long-term funds.
Jeff Park further hypothesized that multi-asset portfolios were forced to deleverage in a highly correlated environment, including hedging exposure to Bitcoin; rapid liquidation of options and basis trading triggered a short-term gamma effect, forcing counterparties to sell IBIT during the decline, thus exacerbating volatility, but without resulting in substantial long-term capital outflows. Bitcoin prices rebounded as some neutral strategies replenished their positions on February 6th.
He concluded that this round of decline is more likely the result of a resonance between traditional financial system risk management and derivatives mechanisms, rather than a structural deterioration in the crypto market itself. Changes in ETF net inflows in the following days will be an important indicator to observe whether there is new long-term demand.
