A viral theory introduced on the Unchained podcast suggested that Bitcoin’s February 5 price drop coincided with record IBIT ETF options activity, not panic in spot markets.
A Hong Kong hedge fund may have faced forced unwinds, triggering hedging flows that pressured Bitcoin prices. However, this theory has not been confirmed yet.
South Korean crypto exchange, Bithumb, mistakenly credited 620,000 BTC during a promotional event. This was a bigger number than the exchange had at the time of filing, adding regional uncertainty to an already tense market.
Bitcoin’s recent pullback has sparked fresh debate in crypto markets. While many first blamed weak spot demand or macro pressure, a new theory points in a very different direction.
Some market watchers now believe that a leveraged options position tied to BlackRock’s spot Bitcoin ETF may have played a major role in the decline. At the same time, a massive operational error at South Korean exchange Bithumb added to regional uncertainty, further shaking market confidence.
The idea centers on the iShares Bitcoin Trust ETF, known as IBIT. According to Parker White, Chief Investment Officer at DeFi Development Corp, stress inside the IBIT options market may explain why Bitcoin prices slid sharply earlier this month.
On February 5, the Bitcoin price crashed from around $70,000 to near $63,000. That same day, IBIT recorded its highest trading volume on record. What made the move unusual was that spot Bitcoin volumes and perpetual futures activity did not show the same level of panic.
White explained on the Unchained podcast that the stress appeared concentrated in short-dated IBIT options. Implied volatility jumped fast. He said this pointed to an options market event rather than a broad-based crypto sell-off.
“After talking to multiple folks, I am much more convinced now that an HK-based fund, which is a large holder of IBIT, blew up,” White had previously said. “Moving from hypothesis to strong theory at this point.”
The theory suggests that a Hong Kong-based hedge fund was heavily involved in selling volatility through IBIT options. When volatility spiked back in October, the fund took losses but did not exit. Instead, it may have doubled down.
At the same time, investor redemptions reportedly added pressure. Under Hong Kong rules, some funds operate with long settlement cycles. If a large redemption request came in, the fund may have been forced to unwind positions quickly once the lock-up period ended.
If true, that forced unwind could have created sharp hedging flows. When dealers hedge large option exposures, they often buy or sell the underlying asset. In this case, selling pressure may have spilled over into Bitcoin itself.
White also suggested that another trader may have taken the opposite side of the trade early. “Make no mistake. There was actually a new billionaire crypto trader mentioned this week,” he noted. The idea is that someone bought cheap downside protection months earlier and benefited when volatility exploded.
Still, there is no official proof yet. Market observers are now waiting for the upcoming 13F filings in May. If a large Hong Kong-based holder sharply reduces its IBIT position, that could support the theory.
At the same time, Asia’s crypto market faced another shock. South Korean exchange Bithumb mistakenly distributed far more Bitcoin than it held during a promotional campaign. Due to an internal error, over 2,000 BTC were sent to each winner. In total, roughly 620,000 BTC was credited to user accounts.
The exchange later said it recovered 99.7% of the assets. However, some users managed to sell 1,788 BTC before the tokens were clawed back. A bigger concern came from Bithumb’s earlier filing, which showed it held about 42,031 BTC at the time. This is 15 times less than the actual figure distributed to the users, thus raising questions on how and if the exchange accumulated 577,969 BTC after filing. Although the Local regulators have since launched inspections. While the issue appears contained, it added to regional uncertainty during an already tense market phase.
Also Read: Crypto Exchange Bithumb Hands Out $195 Million Bitcoin to Users by Mistake
Bitcoin (BTC) price today, at the time of writing, dropped 0.85% over 24 hours to $67,809.73. Despite the small dip, the leading cryptocurrency holds a market cap of over $1.35 trillion.
CoinSwitch Markets Desk noted, “BTC dipped toward the $65,500-$66,000 zone before rebounding above $69,000 and briefly testing $70,500-$71,000, where sellers capped the move and pushed price back toward $68,000. BTC is now trading in the $67,000-$69,000 range, signaling short-term indecision.”
CoinSwitch analysts added, “Spot participation remains active, with BTC and ETH spot volumes rising over 10% in the past 24 hours. Institutional accumulation continues as Strategy purchased 2,486 BTC for $168.4 million, bringing total holdings to 717,131 BTC. For now, $70,000-$71,000 acts as resistance, while $66,000-$67,000 remains near-term support.”
Also Read: Crypto Prices Today: Bitcoin Price Holds $67,809, XRP at $1.47 as Goldman, Nasdaq CEOs Attend Mar-a-Lago Crypto Forum
The Hong Kong fund theory is still unconfirmed, but it fits many market signals. The stress was seen in ETF options, not in broad spot markets. That detail matters. If upcoming filings show a sharp exit from IBIT by a concentrated holder, it may confirm that this was not a normal crypto dip. Until then, Bitcoin appears to be stabilizing between key support and resistance levels.
Avinash Shekhar, Co-founder and CEO, Pi42, explained, “If buyers reclaim control and push prices firmly above $70,000, it could trigger a renewed uptrend.” If not, fresh selling pressures may return.
Is Bitcoin’s Market Cycle Changing in 2026?
1. Why did Bitcoin price crash?
Bitcoin dropped from around $70,000 to near $63,000 on February 5. What stood out was that spot trading volumes and perpetual futures did not show extreme panic. Instead, record activity appeared in the options market of the iShares Bitcoin Trust (IBIT), managed by BlackRock. Analysts believe stress in short-dated options may have caused heavy hedging flows, pushing Bitcoin lower.
2. What is the Hong Kong hedge fund theory?
The theory suggests that a Hong Kong-based hedge fund sold volatility through IBIT options. When implied volatility spiked, the fund may have suffered large losses. If investor redemptions forced it to unwind positions quickly, dealers hedging those trades could have sold Bitcoin. However, there is no official confirmation yet, and markets are waiting for filings to verify this claim.
3. What is IBIT and why does it matter?
IBIT is the ticker for the iShares Bitcoin Trust, a spot Bitcoin ETF launched by BlackRock. It allows investors to gain exposure to Bitcoin without holding the asset directly. Because IBIT is large and widely traded, sharp moves in its options market can impact Bitcoin’s price through hedging flows and liquidity effects.
4. What happened with Bithumb’s Bitcoin error?
South Korean exchange Bithumb accidentally credited around 620,000 BTC to user accounts during a promotion. The exchange later recovered 99.7% of the assets. However, some users sold 1,788 BTC before recovery. The incident raised concerns because the credited amount was far higher than the exchange’s reported Bitcoin holdings at the time.
5. What is the Bitcoin price today?
Bitcoin is currently trading near $67,800, moving within a $67,000-$69,000 range. Analysts see $70,000-$71,000 as key resistance levels. On the downside, $66,000-$67,000 is acting as short-term support. A breakout above resistance could renew bullish momentum, while a drop below support may invite fresh selling pressure in the near term.
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