Bitcoin suffered its worst sell-off since the FTX collapse this week, briefly breaking below $61,000 and falling over 52% from its all-time high of $126,000 in October last year. Amid market panic, BitMEX co-founder Arthur Hayes and DeFi Dev Corp CIO Parker White both pointed fingers at BlackRock's spot Bitcoin ETF IBIT and the complex derivatives built around it.
Arthur Hayes: IBIT Hedging Likely Triggered the Crash
Hayes posted on social media that Bitcoin's crash may stem from dealers hedging IBIT structured products. Since the ETF launched, Wall Street banks and hedge funds have constructed various derivatives and structured notes around IBIT. A core strategy is the basis trade: buying IBIT as collateral while shorting CME Bitcoin futures to capture an annualized 7% to 10% risk-free spread. When the futures basis contracts sharply, the trade must be unwound—selling the ETF and covering futures shorts—turning net inflows into massive outflows.
These hedge funds never bought IBIT because they believed in Bitcoin; they just wanted a few extra basis points above the federal funds rate. When the basis disappears, they sell without hesitation.
Hayes said he will systematically compile a list of all IBIT-related notes issued by major banks to identify key trigger points that could cause further price volatility.
Parker White: Hong Kong Hedge Funds Are the Hidden Bomb
White offered a more specific theory: the turbulence originated from one or more Hong Kong-based non-crypto hedge funds. Key clues include single-asset fund structures with extreme IBIT concentration and segregated margin; highly leveraged options strategies, where funds bought deep out-of-the-money call options after Bitcoin's October decline and saw IBIT options volume surge to a record 2.33 million contracts with $900 million in premium on the crash day; yen carry trade unwinding, as funds used yen carry to finance options positions and faced rising costs when the yen appreciated; and silver's 20% plunge, which hit cross-asset positions and amplified deleveraging pressure.
Silver crash + yen carry unwind + IBIT options blowup = the perfect storm. Multiple pressures detonated simultaneously, and Bitcoin was the victim of the deleveraging spiral.
IBIT Capitulation Breaks Multiple Records
Data supports these theories. During the Feb 5-6 crash, IBIT set several all-time records: single-day trading volume of $10.7 billion (284 million shares); options premium of $900 million, suggesting forced liquidation of a large holder; $2.6 billion in crypto market liquidations over 24 hours, mostly longs; and Bitcoin's single-day realized net loss of $3.2 billion, surpassing all previous black swan events including FTX, LUNA, 519, and 312.
Debate Persists
Not everyone agrees with the "Hong Kong hedge fund blow-up" thesis. Some analysts argue the abnormal flows reflect widespread market panic and routine risk management rather than a single institution's catastrophic collapse. Skeptics note no regulatory filing has directly confirmed a specific fund's failure. Supporters counter that IBIT's massive volume, record options premium, and the surge in open interest after Nasdaq lifted options limits all point to a major player being wiped out.