Bitcoin fell 13.2% on February 5 during a broad market selloff that swept through U.S. risk assets. The decline coincided with record trading in BlackRock's iShares Bitcoin Trust (IBIT) amid extreme volatility. According to Jeff Park, CIO of ProCap, the move was one of the most severe capital markets sessions in recent years.
IBIT Surpasses $10B in Daily Volume, Put Options Dominate
Jeff Park noted that IBIT posted a record trading volume exceeding $10 billion on February 5 — double its previous all-time high. Options activity also hit a new peak in contract count, led predominantly by put trading rather than calls. Meanwhile, IBIT price action closely tracked software stocks and other risk assets.
Goldman Sachs' prime brokerage desk flagged February 4 as one of the worst days for multi-strategy funds, calling the event a 3.5 z-score — an extremely rare performance shock.
Risk Reduction Triggers Selloff but ETF Inflows Rise
As risk managers rushed to trim exposure, the process cascaded into a widespread selloff, according to Park. Despite the sharp price drop, IBIT did not see large net redemptions. Instead, approximately 6 million new shares were created, adding more than $230 million in assets. Across the broader Bitcoin ETF market, net inflows exceeded $300 million on the day.
Park suggested the selloff likely hit multi-asset portfolios rather than crypto-only funds. These portfolios often rebalance automatically during extreme correlations. Additionally, short gamma exposure from options markets accelerated downside pressure.
CME Basis Spreads Widen Sharply, Signaling Forced Unwinds
On February 6, CME Bitcoin basis spreads jumped from 3.3% to about 9%, pointing to forced unwinding of basis trades involving spot sales and futures purchases. As dealers adjusted hedges, short gamma positions intensified selling pressure. Park added that market makers likely sold IBIT aggressively to build inventory, rather than triggering redemptions.
Bitcoin rebounded more than 10% on February 6. During that session, CME open interest recovered faster than activity on Binance, indicating renewed positioning in market-neutral strategies. Meanwhile, Binance open interest continued to decline as crypto-native traders deleveraged. Park concluded that these combined flows explain why ETF creations remained balanced while prices stayed lower.
The episode, while severe, saw ETF channels maintaining strong inflows and a swift basis normalization — suggesting the market may absorb the shock more quickly than initial fears implied.