Theories are swirling about what caused the market crash. From a technical perspective, it is clear that the massive collapse of recent weeks was more than just a short-term response to macro volatility.
Certainly, the first half of January saw significant capital inflows as the major high caps regained key levels. In this context, it makes sense that the crash happened as the crypto market wiped out liquidity and deleveraged.
However, analysts are now pointing to factors beyond just leveraged positions. Bitcoin instead [BTC] The 35% drop may be linked to BlackRock’s IBIT ETF – Evidence that institutional moves have amplified the downturn.
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Arthur Hayesco-founder of BitMex, puts it simply: BTC was sold because banks hedged positions tied to IBIT ETF. He cited Morgan Stanley’s “structured note” linked to IBIT, essentially a bet placed by the bank on Bitcoin.
When BTC moved, these banks had to sell quickly to protect themselves. And it wasn’t just Morgan Stanley. Other major non-crypto players have done so allegedly carried out similar transactions also, adding fuel to the volatility.
The result? On February 5, heavily indebted IBIT ETF positions were forced to unwind. Trading reached record levels that day: $10.7 billion in volume and $900 million in option premiums, both record highs.
Fast forward to now, and IBIT Bitcoin ETF has done just that included the first inflow of more than $200 million in almost a month. It’s still early, but could this be a sign that BTC is stabilizing and some investors are starting to take a step back?
BlackRock Raises Questions About Bitcoin’s Recovery
Rarely are market movements purely ‘coincidental’.
Take the October crash: Bitcoin’s price fell 30%, driven in part by theories surrounding Strategy possible exclusion from the MSCI index. That led to outright panic, leading to widespread capitulation in risky assets.
Fast forward to now, and the crash is viewed through a similar lens. In that context, the $200 million inflow into IBIT and Bitcoin’s Coinbase Premium Index (CPI), which is up 65% in less than a week, is anything but a fluke.
Source: CryptoQuant
Simply put, institutional investors could take a step back. A few days ago, the forced reduction led to a major risk reduction. The CPI hit a monthly low, IBIT saw massive outflows and Bitcoin broke below the $80,000 support level.
Now, the reversal in these numbers could indicate a possible bullish shift.
According to AMBCrypto, the market may be stabilizing, with institutions potentially paving the way for a BTC bottom. In light of this, closely monitoring these indicators is crucial to see whether the crash is really over or not.
Final thoughts
- BlackRock’s IBIT ETF and other major players amplified volatility, with record trading on February 5 due to forced tapering.
- Recent inflows into IBIT and a 65% jump in Bitcoin’s Coinbase Premium Index suggested institutions may be taking a step back.