Bitcoin Drop Linked to $IBIT Hedging, Hayes Flags Risks

Key Highlights

Bitcoin’s recent dip links to hedge funds hedging $IBIT, adding pressure, though institutional support may steady the market soon.
$BTC fell from $120K to $68K amid IBIT flows and options trades, signaling broader market corrections, not just short-term blips.
Despite the sell-off, ETF and corporate buying create a floor, suggesting Bitcoin could recover as panic-driven selling eases.

Bitcoin tumbled sharply this week, drawing investor attention to potential causes behind the sell-off. Arthur Hayes, co-founder of BitMEX, linked the decline to dealer hedging connected with the iShares Bitcoin Trust ($IBIT) structured products.

In an X post, Hayes noted that $BTC’s price movements may reflect strategic adjustments by large holders in the trust. “$BTC dump probably due to dealer hedging off the back of $IBIT structured products,” he tweeted. He also promised to compile a full list of bank-issued notes to track triggers behind rapid price swings.

$BTC dump probably due to dealer hedging off the back of $IBIT structured products. I will be compiling a complete list of all issued notes by the banks to better understand trigger points that could cause rapid price rises and falls. As the game changes, u must as well. pic.twitter.com/9DF8VE9XBL
— Arthur Hayes (@CryptoHayes) February 7, 2026

Bitcoin briefly dipped toward $60,062 on Thursday, its lowest since October 2024, marking more than a 52% drop from its record $126,000 high in October 2025. Despite this, Bitcoin has rebounded slightly and trades at $68,157, with a 24-hour volume of $90.12 billion as per CoinMarketCap. Meanwhile, the global crypto market cap rose 4.59% to $2.34 trillion, even as total market volume fell 33.24% to $206.22 billion.

IBIT flows and market correlations

The iShares Bitcoin Trust has been active in recent years, often moving in line with Bitcoin’s price. According to Sosovalue data, the fund saw $175.33 million pulled out on February 5, 2026, showing that investors were cautious during the market turbulence. Still, total inflows since the fund started remain strong at $61.61 billion, reflecting continued long-term interest.

iShares Bitcoin Trust (IBIT) Trading Volume — Source: Sosovalue data

On February 5, trading in the iShares Bitcoin Trust reached $10.73 billion, with 284.37 million shares exchanged, showing high investor activity. Bitcoin made up 3.82% of IBIT’s total $48.68 billion in assets. The fund traded slightly below its net value at -0.35%.

Hayes and analyst Parker suggest that big IBIT holders, likely hedge funds, may have used options strategies that added pressure to the recent sell-off.

Parker noted, “IBIT has become the 1 venue for BTC options trading, so my guess is that a hedge fund trading IBIT options is the culprit.” He highlighted that some Hong Kong-based single-asset funds may have an isolated margin to contain losses. Parker also linked broader market pressures, including silver price swings and JPY carry trade unwinds, to these movements.

This was the highest volume day on $IBIT, ever, by a factor of nearly 2x, trading $10.7B today. Additionally, roughly $900M in options premiums were traded today, also the highest ever for IBIT. Given these facts and the way $BTC and $SOL traded down in lockstep today (normally…
— Parker (@TheOtherParker_) February 6, 2026

Technical indicators signal downtrend

Bitcoin’s price has been falling since it topped $120,000 in October, with each rally reaching lower highs and each dip going lower, according to Trading data on one day chart. The recent slide from the mid-$90,000s to around $68,350 shows selling pressure has picked up.

Furthermore, the technical indicators are also indicating a weak market. The Relative Strength Index (RSI) is in the low 30s, which is almost near oversold territory. The MACD is also in deep negative territory, indicating that this decline may not be a mere pullback in a larger uptrend.

Institutional support could stabilize BTC

Despite recent volatility, institutional buying may provide a floor. Matt Hougan, Bitwise CIO, highlighted ETF flows and corporate accumulation that outpaced newly mined Bitcoin. He stated, “We ran the four-year cycle last year. We’re already at the bottom. I think we’re coming back up.”

Founder and managing partner of alternative investment firm SkyBridge, Anthony Scaramucci, also recently added in a CBC interview that nothing in the market warranted the crash, warning that fear may be driving short-term sentiment.

The current sell-off in Bitcoin comparatively seems related to actions in $IBIT by hedge funds, influenced by market momentum and options hedging. Institutional investors may act as market stabilizers, attributing long-term potential upside.

Also Read: Strategy Shares Surge 26% as Bitcoin Rebounds to $70K

Disclaimer: The information researched and reported by The Crypto Times is for informational purposes only and is not a substitute for professional financial advice. Investing in crypto assets involves significant risk due to market volatility. Always Do Your Own Research (DYOR) and consult with a qualified Financial Advisor before making any investment decisions.