Arthur Hayes, co-founder of BitMex, has pointed to BlackRock“s IBIT fund as a significant factor behind the recent crash of Bitcoin (BTC) in the cryptocurrency market. This analysis emerges as BTC shows signs of recovery, climbing by 7% after a steep decline of over 50% from its all-time high.
In a recent post on X, Hayes suggested that the recent sell-off in BTC was largely a result of dealer hedging activities related to BlackRock“s iShares Bitcoin Trust (IBIT) structured products. He stated, “The $BTC dump probably due to dealer hedging off the back of $IBIT structured products.” He also mentioned plans to compile a comprehensive list of bank-issued notes to pinpoint potential trigger points that could lead to swift price movements.
Hayes” observations come in the wake of Bitcoin plummeting to as low as $60,000, resulting in a significant outflow of funds from the crypto ecosystem. The market cap of cryptocurrencies saw a staggering decrease of approximately $2 trillion, down from a peak of about $4.38 trillion last October. Following this downturn, the price of Bitcoin had already dropped by 30% this year after reaching $60,000. However, the cryptocurrency has since reclaimed the $70,000 milestone, registering an increase of more than 7%, as reported by TradingView.
Moreover, Hayes” claims find some support in a note from Morgan Stanley, which highlighted a critical price point near the October 31 high at $105,000, marking a 75% knock-in level at $78,700. When Bitcoin breached this threshold, it triggered forced selling by dealers to manage associated risks.
The repercussions of the Bitcoin crash were not confined to the cryptocurrency itself; they also affected other markets. For instance, both gold and silver have experienced heightened volatility, attributed to leveraged buying strategies. Silver suffered a decline of over 18% following its recent bull run, while stocks like MSTR also faced downward pressure as bearish sentiment around Bitcoin grew.
Despite the speculation around Bitcoin”s price fluctuations, some experts have indicated that volatility in other asset classes has contributed to the recent downturn. A report from CryptoQuant pointed out that institutional demand has significantly reversed. US exchange-traded funds, including those issued by BlackRock, which were accumulating Bitcoin last year, have now begun to liquidate their positions, further exacerbating the crash.
Interestingly, Bitcoin”s price had surged when former President Donald Trump returned to office last year, with many anticipating a more favorable regulatory approach towards cryptocurrencies. Trump”s family ties to WLFI, a cryptocurrency-related asset, added to the optimism. However, despite these political dynamics, market forces have continued to drive the performance of digital assets.
