Arthur Hayes: “Bitcoin’s sharp drop likely due to BlackRock’s ‘IBIT’”

Doohyun Hwang

Summary

Arthur Hayes said the recent sharp drop in Bitcoin is likely due to structured products linked to BlackRock’s spot Bitcoin ETF ‘IBIT’.
He explained that when banks and securities firms issue derivatives based on an ETF, delta-hedging sales to protect against losses can be triggered at certain price levels, exacerbating declines in a downturn.
Hayes said he plans to compile a list of related notes and structured products issued by commercial banks to identify trigger points that drive sharp price swings.

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As Bitcoin’s price has plunged recently—at one point falling to $60,000—an analysis has emerged that this sell-off may be driven by derivatives (structured products) linked to BlackRock’s spot Bitcoin ETF, ‘IBIT’.

On the 6th (local time), Arthur Hayes, co-founder of BitMEX, wrote on X, “This Bitcoin dump is most likely due to hedging flows from structured-product dealers using BlackRock’s spot Bitcoin ETF as the underlying asset.”

Typically, when banks or securities firms issue derivatives (such as ELS and ETN) based on an ETF, a “delta-hedging” mechanism kicks in: once prices reach certain levels, they must sell the underlying asset (Bitcoin) to defend against losses. This, he explained, created a vicious cycle in which selling begets more selling during downturns, amplifying the decline.

He added, “To better identify the ‘trigger points’ that can cause sharp price swings, I plan to compile a list of all relevant notes and structured products issued by banks currently in the market.”