Arthur Hayes, co-founder of BitMEX, pointed to hedging related to BlackRock’s iShares Bitcoin Trust (IBIT) as a major factor behind the recent Bitcoin sell-off.
According to Hayes, dealer hedging associated with IBIT and similar structured products can force immense, mechanical selling when markets move against those positions.
Reports it should be remembered that such moves may intensify price declines already caused by other pressures.
Heavy hedges can create sudden selling pressure: Hayes
Hayes argues that banks and dealers writing structured notes and ETF-linked products often hedge their exposure in spot and derivatives markets.
These hedges can be bulky and swift. When a immense product faces outflows or needs to be written down, protections are quickly adjusted. This could translate into a sudden selling pressure that will drive prices even lower, especially if liquidity it is slim.
$BTC throw it away probably because the dealer was protecting himself from the rear $ Go structured products. I will be compiling a complete list of all bank notes issued to better understand the trigger points that can cause prices to spike and drop. As the game changes, so must you. pic.twitter.com/9DF8VE9XBL
— Arthur Hayes (@CryptoHayes) February 7, 2026
Market movements and liquidity stress
The market was behaving like a room where people wanted to leave immediately. Prices dropped and then rebounded. Reports say that Bitcoin dropped sharply from recent highs before making a partial recovery.
Bitcoin dropped to about $68,500 on Saturday, down 16% over the past seven days, according to Coingecko data.
Trades and order books showed a piercing enhance in volume, one of the signs that hedging flows and a quick rebalancing are coming into play. Some analysts say macro news and investor positioning also played a role. The truth probably lies in the overlap between these causes.
Who bears the risk
Dealers bear risk when insuring intricate products. At certain points, this risk is transferred back to the market through hedging. In this way, according to Hayes, a few immense issuers can indirectly trigger a chain reaction that affects many other holders and traders. The movements can be sudden and mechanical, not always dictated by sentiment.
Vigilant Washington
Reports talk about the role of the spot ETFs in cryptocurrency markets is currently of interest to regulators and policymakers. US President Donald Trump’s economic team is monitoring immense flows into and out of institutional instruments as market participants debate whether ETFs are stabilizing prices or adding novel tipping points.
Regardless of your view, structured products now provide a clear link between classic finance and the volatility of cryptocurrencies.
Broader takeaways
This episode highlights how novel financial solutions can create novel channels for the spread of the virus. Some see the presence of immense, regulated players as a positive factor for long-term adoption.
Others warn that these same players are introducing conventional market mechanisms that, when stretched, can behave unpredictably. The reports note that both perspectives are useful in determining the causes of price changes.
Who is right and what next
Hayes presented a theory that links observable collateral flows to the crash. It’s a compelling thread that fits with many of the market signals we’ve seen in recent days.
However, other factors – macro changes, concentrated profit-taking and liquidity gaps – likely also played a role. Traders will be watching flows closely and tough questions will be asked of issuers of structured products.
Featured image from Unsplash, chart from TradingView