The recent volatility in the cryptocurrency market has sent shockwaves through the community, with Bitcoin’s price oscillating dramatically. At the center of this turmoil lies BlackRock’s iShares Bitcoin Trust (IBIT), whose hedging activities are being scrutinized by industry experts.
BitMEX co-founder Arthur Hayes has publicly attributed Bitcoin’s plunge to approximately $60,000 to the IBIT fund’s structured products. Following this dip, Bitcoin managed to regain some ground, climbing 7% to settle above $70,000.
Hayes shared his insights on social media, suggesting that dealer hedging linked to IBIT played a pivotal role in accelerating the sell-off. As Bitcoin’s value hit certain threshold points, dealers found themselves compelled to sell assets to manage risk, inadvertently fueling further declines.
In an atmosphere where the total market cap of cryptocurrencies dwindled by nearly $2 trillion during this downturn, Bitcoin’s trajectory has raised alarms. The asset had previously peaked at around $105,000 last October, only to nosedive more than 50% to its recent lows.
In an unusual and unprecedented development, options trading related to IBIT skyrocketed, with a staggering 2.33 million contracts exchanged on the day of the crash. Total premiums surged to $900 million—a significant figure that parallels the market cap of several lesser-known cryptocurrencies.
As the IBIT fund witnessed a 13% decline to its lowest levels since October 2024, many observers noted that put options—traditionally used for downside protection—slightly outnumbered their call option counterparts during the chaos.
Market analyst Parker expressed that this surge in trading volume indicated significant distress in the market, potentially due to a hedge fund’s failure. The theory suggests that a heavily-invested fund found itself unable to meet margin calls as Bitcoin’s value plummeted, forcing liquidation of IBIT shares, thereby amplifying downward pressure on the market.
Supporting this perspective, Shreyas Chari of Monarq Asset Management remarked on the systematic selling patterns observed across major assets connected to margin calls, particularly IBIT.
However, not all experts concur with the hedge fund collapse narrative. Options expert Tony Stewart contended that a substantial portion of the premiums—amounting to $150 million—arose mainly from traders executing buybacks on put options. Stewart characterized the record volume as a manifestation of sheer market panic rather than a direct consequence of a shattered fund.
The current market landscape indicates a concerning trend regarding institutional demand for Bitcoin. Notably, U.S. exchange-traded funds, including IBIT, that once accumulated Bitcoin throughout last year have become net sellers in 2026, potentially signaling a downturn in traditional investors’ interest.
The crypto market’s earlier optimism, which was bolstered by expectations of favorable regulations under a renewed Trump administration, seems increasingly overshadowed by alarming market forces. Despite a personal stake in the crypto industry, enthusiasm surrounding potential regulatory support has not been enough to stave off the pervasive downturn.
Hayes further pointed to critical trigger points that have emerged in sentiment and pricing, including a pivotal knock-in level identified at $78,700, which, when breached, led to forced selling as dealers scrambled to hedge their positions.
The impact of this volatility extended beyond Bitcoin; other assets experienced significant price swings. For instance, silver’s value plummeted by over 18%, echoing a similar sentiment in gold, which also saw increased fluctuations amid the broader market chaos.
Negative sentiment surrounding Bitcoin negatively affected related assets such as MicroStrategy, which holds substantial Bitcoin on its balance sheet. Despite a recent recovery to around $70,000, Bitcoin remains down 30% this year, leaving many investors in a state of unease.
