Did BlackRock’s Bitcoin ETF Cause the Crypto Market Crash?

TLDR

• Arthur Hayes blames BlackRock’s IBIT fund hedging activity for Bitcoin’s crash to $60,000
• Bitcoin fell over 50% from its all-time high before recovering 7% to reclaim $70,000
• IBIT options trading hit record 2.33 million contracts during Thursday’s crash
• Total premiums paid reached $900 million on the day Bitcoin dropped 13%
• Debate continues whether a hedge fund blowup or market panic drove the record activity

BitMEX co-founder Arthur Hayes has pointed to BlackRock’s iShares Bitcoin Trust (IBIT) as a key driver behind Bitcoin’s recent crash. The cryptocurrency fell to around $60,000 before bouncing back 7% to reclaim the $70,000 level.

Hayes shared his analysis on X, stating that dealer hedging through IBIT structured products likely accelerated the sell-off. He explained that as Bitcoin prices fell through certain trigger points, dealers were forced to sell to manage their risk exposure.

The crypto market lost roughly $2 trillion in market cap during the downturn. Bitcoin peaked at around $105,000 in October before falling more than 50% to its recent low.

Hayes is now compiling a list of bank-issued notes to identify trigger points that could cause rapid price movements. He emphasized that traders need to adapt their strategies as market conditions change.

Record Options Activity During Crash

Options trading on BlackRock’s IBIT surged to record levels on Thursday as Bitcoin crashed. The fund saw 2.33 million contracts traded, with total premiums reaching $900 million in a single day.

The IBIT fund itself fell 13% to its lowest level since October 2024. Put options, which protect against price drops, slightly outnumbered call options during the trading session.

This level of activity was unprecedented for the fund. The $900 million in premiums equals the market cap of several cryptocurrencies ranked beyond the top 70.

Market analyst Parker suggested the record activity stemmed from a hedge fund blowup. According to this theory, a fund heavily invested in IBIT faced margin calls as Bitcoin fell.

The fund allegedly bought cheap out-of-the-money call options using borrowed money. When these bets moved against them, brokers demanded more collateral.

Competing Explanations

Unable to meet margin requirements, the fund reportedly dumped large amounts of IBIT shares. This selling pressure contributed to record spot volume of $10 billion.

Shreyas Chari from Monarq Asset Management supported this view. He noted systematic selling across major assets tied to margin calls, especially in IBIT.

However, options expert Tony Stewart disagreed with the hedge fund blowup theory. Using data from Amberdata, he showed that $150 million of the premiums came from traders buying back put options.

Stewart argued the remaining activity comprised mostly smaller trades typical of a chaotic market day. He characterized the record volume as market panic rather than evidence of a single fund failure.

He acknowledged some activity could have occurred in private over-the-counter deals. But the publicly available data didn’t support a massive blowup, in his view.

Market Forces Override Political Support

CryptoQuant analysts noted that institutional demand has reversed materially this year. US exchange-traded funds, including IBIT, accumulated Bitcoin throughout last year but have been net sellers in 2026.

The research firm stated this steady selling signals declining interest from traditional investors. Overall pessimism about crypto appears to be growing despite earlier optimism.

Bitcoin initially rallied when Donald Trump returned to the White House. Many expected crypto-friendly regulatory policies from the administration.

Trump’s family owns World Liberty Financial, giving the president a personal stake in the crypto industry. Yet market forces have overwhelmed any political tailwinds.

Hayes referenced a Morgan Stanley note that struck near Bitcoin’s October 31 high at $105,000. This placed a critical 75% knock-in level at $78,700.

When Bitcoin dropped through this price point, dealers became forced sellers to hedge their exposure. This selling pressure compounded the downward move.

The volatility spread to other assets as well. Silver fell over 18% after its bull rally, while gold also experienced increased volatility.

MicroStrategy stock declined as negative sentiment around Bitcoin grew. The company holds large amounts of Bitcoin on its balance sheet.

Bitcoin has fallen 30% this year after touching $60,000. The recovery to $70,000 on Friday provided some relief to crypto holders.

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