Arthur Hayes, co-founder of BitMEX, has pointed to hedging associated with BlackRock’s iShares Bitcoin Trust (IBIT) as a key driver behind Bitcoin’s recent sell-off.
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According to Hayes, hedging dealers on IBIT and similar structured products can force large, mechanical selling when markets move against these positions.
Reports Keep in mind that such moves can amplify a price decline already caused by other pressures.
Heavy hedges can cause sudden selling pressure: Hayes
Hayes said banks and dealers underwriting structured bonds and ETF-linked products often hedge their exposure to the spot and derivatives markets.
Those hedges can be heavy and fast. When a major product faces outflows or redemption triggers, hedges are quickly adjusted. That can translate into sudden selling pressure that pushes prices down further, especially if there is sudden selling pressure liquidity is thin.
$BTC dump probably due to dealer covering the rear $IBIT structured products. I’m going to compile a complete list of all banknotes issued by the banks to better understand trigger points that can cause rapid price increases and decreases. As the game changes, so should you. pic.twitter.com/9DF8VE9XBL
— Arthur Hayes (@CryptoHayes) February 7, 2026
Market movements and liquidity stress
The market behaved like a room full of people trying to leave immediately. Prices fell and then bounced. According to reports, Bitcoin fell sharply from its recent highs before making a partial recovery.
Bitcoin fell to about $68,500 on Saturday, down 16% in the past seven days, Coingecko data showed.
The trades and order books showed spikes in volume, signaling that hedging flows and rapid rebalancing were at play. Some analysts say macro news and traders’ positioning also mattered. The truth probably lies in the overlap of these causes.
Who bears the risk
Dealers are at risk when they underwrite complex products. At certain times, that risk is brought back onto the market through hedging. In this way, according to Hayes, a few large issuers can indirectly cause a chain reaction that affects many other holders and traders. The movements can be sudden and mechanical, and not always driven by sentiment.
A vigilant Washington
Reports say the role of ridicule ETFs in the crypto markets is now on the radar of regulators and policymakers. U.S. President Donald Trump’s economic team has been eyeing large flows in and out of institutional vehicles as market participants debate whether ETFs stabilize prices or add new stress points.
Regardless, structured products now represent a clear link between traditional finance and crypto volatility.
Broader takeaways
This episode underlines how new financial conduits can create new channels of contagion. Some see the presence of large, regulated players as having a net positive effect on longer-term adoption.
Others warn that these same players are introducing conventional market mechanisms that can behave unpredictably when stretched. Reports note that both perspectives are useful in piecing together the question of why prices moved the way they did.
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Who is right, and what now
Hayes has developed a theory that links the observable hedging flows to the crash. It’s a compelling thread that fits many of the market signals we’ve seen in recent days.
Yet other factors – macro shifts, concentrated profit-taking and liquidity shortages – probably also played a role. Traders will be watching the flows closely, and issuers of structured products will be asked tough questions.
Featured image from Unsplash, chart from TradingView