Bitcoin Crash Tied to IBIT Dealer Hedging, Says Arthur Hayes
- Arthur Hayes links the Bitcoin crash to IBIT dealer hedging during rising volatility.
- Bitcoin fell to $60,000 as dollar liquidity tightened throughout global markets.
- Treasury cash movements and ETF sales increased pressure on cryptocurrency assets.
Bitcoin rebounded nearly 3% from the previous day, after collapsing more than 50% from its all-time high, yet debate continues over what drove the sharp sell-off across crypto markets. Arthur Hayes attributed the crash to dealer hedging tied to BlackRock’s iShares Bitcoin Trust, known as IBIT. In a post on X, Hayes said structured products linked to IBIT likely forced dealers to sell Bitcoin during rising volatility.
The downturn pushed Bitcoin as low as $60,000 and triggered a broad market retreat. During the slide, total crypto market capitalization dropped by about $2 trillion from a peak near $4.38 trillion last October. Capital exited quickly as volatility intensified across digital assets.
Hayes argued that technical indicators and on-chain signals played a smaller role. Instead, he framed the move as a response to changing macro conditions and institutional positioning. What happens when structured products and liquidity pressures collide during market stress?
Dealer Activity and Structured Product Pressure
Hayes said dealer hedging linked to IBIT-based notes likely accelerated Bitcoin’s decline.
He noted that structured products require dealers to rebalance positions when prices cross specific thresholds. This process often increases selling pressure during sharp moves.
He cited a bank-issued note from Morgan Stanley struck near the October 31 Bitcoin high of $105,000. That structure placed its 75% knock-in level at $78,700. Once Bitcoin broke that level, dealers became forced sellers to hedge risk.
According to Hayes, such forced selling can deepen price swings during fragile liquidity conditions. He added that he continues to compile a broader list of similar bank-issued notes. His goal involves identifying trigger levels that could prompt rapid price adjustments.
Dollar Liquidity and Treasury Actions
Beyond structured products, Hayes pointed to shifting US dollar liquidity as a major driver. He estimated that nearly $300 billion in dollar liquidity moved in recent weeks. He linked the shift to actions by the US Treasury.
Hayes said a sharp rise in the Treasury General Account balance absorbed around $200 billion. That process reduced cash circulating through banks and financial markets. Lower cash availability often tightens funding conditions.
He suggested the Treasury may have acted to prepare for a potential government shutdown. Such preparation requires stronger cash reserves. Hayes said this process removed dollars directly from the system and pressured liquidity-sensitive assets like Bitcoin.
Related: Arthur Hayes: US ‘Colonization’ of Venezuela Could Lift Bitcoin
Broader Market Impact and ETF Flows
As Bitcoin fell, volatility spread into other markets. Gold and silver prices swung as leveraged positions unwound. Silver dropped more than 18% after a strong rally. Equity exposure tied to Bitcoin also weakened. Shares of Strategy fell as bearish sentiment around Bitcoin grew. The pressure reflected broader risk aversion across assets.
Some analysts tied the downturn to shifting institutional behavior. CryptoQuant reported that institutional demand reversed materially. The firm said US spot Bitcoin ETFs, including BlackRock’s IBIT, shifted from accumulation last year to steady selling this year.
CryptoQuant analysts said this signals weakening interest from traditional investors. They added that overall pessimism toward crypto has increased. These trends emerged despite earlier optimism tied to Donald Trump’s return to the White House and expectations of crypto-friendly policies. The market reaction shows how macro forces, liquidity shifts, and structured products can converge quickly.
