# Transmission Related Articles

Can IBIT Really Trigger a Market-Wide Liquidation?

Market discussions have recently focused on the sharp Bitcoin decline and subsequent rebound in early February, with attention turning to the role of BlackRock’s iShares Bitcoin Trust (IBIT). Jeff Park, an advisor at Bitwise, suggests the volatility was closely tied to IBIT’s record-high trading volume and put-heavy options activity on February 5. Contrary to expectations, IBIT saw net creation—not redemption—amid the sell-off, indicating the drop may not have been driven by ETF investor panic. Instead, the pressure likely originated from institutional deleveraging and risk reduction within traditional finance structures. Market makers and multi-asset portfolios adjusted derivatives and hedging positions, transmitting stress through IBIT’s secondary market and options activity, ultimately affecting Bitcoin's price. A common narrative attributes sell-offs to ETF redemptions forcing BTC liquidations. However, only authorized participants (APs) can create or redeem shares. Secondary market trading—no matter how large—only changes share ownership, not the underlying BTC held in custody. On the day of the drop, net BTC outflows from all U.S. spot Bitcoin ETFs amounted to only 5,952 BTC, a small fraction of total holdings. When IBIT sells off in the secondary market, APs may arbitrage discounts by buying shares and hedging with BTC spot sales or futures shorts. This hedging can transmit selling pressure to Bitcoin markets even without significant net redemptions. Thus, IBIT’s influence operates through complex, layered mechanisms rather than direct BTC liquidation.

marsbit02/09 07:39