Odaily Planet Daily reports that Bitwise advisor Jeff Park reviewed the sharp decline in Bitcoin and the crypto market on February 5th. He believes this volatility was more likely triggered by risk unwinding in the traditional financial system and derivatives mechanisms, rather than the fundamental health of the crypto industry or a single “black swan” event.
Jeff Park pointed out that on that day, Bitcoin ETFs, especially IBIT, experienced record-breaking trading volume and options activity, with options trading predominantly in a bearish direction. At the same time, Bitcoin’s price movement over the previous weeks was highly correlated with risk assets like software stocks. February 4th was marked by Goldman Sachs’ prime broker (PB) department as a day of extreme drawdowns for multi-strategy funds. Subsequently, risk management requirements prompted rapid, indiscriminate deleveraging, which affected Bitcoin-related positions and further amplified the decline on February 5th.
He analyzed that although the price dropped over 13% within two days and the market initially expected large-scale ETF outflows, actual data showed that Bitcoin ETFs experienced net inflows overall. IBIT added approximately 6 million shares, increasing by over $230 million in scale. This suggests that the selling pressure mainly came from “paper funds” and non-directional trading related to hedging and market making, rather than long-term capital withdrawals.
Jeff Park further hypothesized that: in a high-correlation environment, multi-asset portfolios are forced to deleverage, including Bitcoin risk exposure after hedging; rapid liquidation of options and basis trades triggered a short gamma effect, forcing counterparties to sell IBIT during the decline, thus exacerbating volatility, but without causing substantial long-term capital outflows. As some neutral strategies covered positions on February 6th, Bitcoin’s price rebounded.
He summarized that this round of decline is more likely the result of resonance between risk management in traditional finance and derivatives mechanisms, rather than a fundamental deterioration of the crypto market itself. The subsequent changes in ETF net flows over the next few days will be an important indicator to assess whether there is new growth demand.
Disclaimer: The information on this page may come from third parties and does not represent the views or opinions of Gate. The content displayed on this page is for reference only and does not constitute any financial, investment, or legal advice. Gate does not guarantee the accuracy or completeness of the information and shall not be liable for any losses arising from the use of this information. Virtual asset investments carry high risks and are subject to significant price volatility. You may lose all of your invested principal. Please fully understand the relevant risks and make prudent decisions based on your own financial situation and risk tolerance. For details, please refer to
Disclaimer.
Related Articles
CleanSpark sells 97% of February Bitcoin production to fund $36.65 million AI transformation
CleanSpark produced 568 Bitcoins in February, sold 553, setting a new sales ratio high, and generated approximately $36.65 million in cash to support expansion into AI and high-performance computing data centers. Currently holds 13,363 Bitcoins, with operational computing power reaching 50 EH/s, accounting for 7% of the global total computing power.
GateNews1m ago
PsiQuantum begins building a million-qubit quantum computing facility, scientists say it is enough to crack Bitcoin encryption technology
PsiQuantum announces the launch of a million-qubit special computing facility, and scientists believe it could crack Bitcoin encryption, although the company's founders state they have no intention of using this technology to attack Bitcoin. Research indicates the potential risk is limited to approximately 10,230 Bitcoins.
GateNews2m ago
Bitcoin ETFs Draw $462M as BTC Briefly Hits $73K
US spot Bitcoin ETFs saw renewed demand on Wednesday, with inflows broad-based across major issuers as BTC briefly breached the $73,000 level. Net inflows into spot BTC funds reached $462 million for the day, marking the third consecutive day of net buying and lifting the weekly total to
CryptoBreaking3m ago
Senator Lummis discusses digital asset market structure legislation with CFTC Chair, emphasizing the urgency of advancement
On March 6th, Senator Cynthia Lummis met with CFTC Chairman Michael Selig to discuss legislation on digital asset market structure. Lummis emphasized the urgency of the legislation and looks forward to continued collaboration with the CFTC on integrating digital assets.
GateNews5m ago
