BlackRock's spot Bitcoin ETF hit a record high in trading volume on Thursday, with market participants suspecting that the sharp volatility may have originated from the forced liquidation of highly leveraged positions in IBIT held by hedge funds.
According to Nasdaq data, BlackRock's spot Bitcoin ETF product IBIT traded over 284 million shares on Thursday, with a notional value exceeding $10 billion, a surge of 169% from the previous record. Meanwhile, the price of IBIT plummeted 13% to around $36, hitting a new low since October 2024, with its year-to-date loss widening to 27%.
The record trading volume was accompanied by massive redemptions and panic in the options market. According to SoSoValue data, redemptions from IBIT reached $175 million that day, accounting for 40% of the total net outflows of $434 million from the 11 Bitcoin ETFs. In the options market, put options were priced at a premium of over 25 volatility points compared to call options, a record high.
According to BlockBeats, Parker White, Chief Investment Officer and Chief Operating Officer of DeFi Dev Corp, stated on social media that he suspects this volatility originated from large IBIT holdings by one or more non-crypto hedge funds. These funds may have attempted to turn the situation around through highly leveraged options trading, but losses continued to widen, ultimately leading to their positions being completely wiped out by the decline in Bitcoin.
Dual Extremes in Trading Volume and Price
IBIT's trading volume of 284 million shares on Thursday far exceeded the previous record. The fund's previous record, set on November 21, was 169 million shares; this volume is almost double that. According to CoinDesk, the notional value corresponding to this trading volume exceeded $10 billion.
In terms of price, IBIT once fell below $35, its lowest level since October 11, 2024. The fund's price had reached a peak of $71.82 in early October last year and has been declining since then. As the world's largest publicly listed Bitcoin fund, IBIT holds physical Bitcoin and is designed to track the spot price of Bitcoin. Bitcoin fell to nearly $60,000 on Thursday.
The combination of record trading volume and a sharp price drop is often seen as a signal of capitulation selling, where long-term holders give up and liquidate their positions at a loss. This marks the most intense selling phase of a bear market and may indicate the beginning of a long and painful bottoming process.
Options market data further confirms the sentiment of panic. According to MarketChameleon data, the premium for long-term put options on IBIT exceeded that of call options by more than 25 volatility points on Thursday, a record high. Put options are contracts investors use to hedge against downside risk.
Parker White pointed out that the options premium was about $900 million, also a record high. However, according to CoinDesk, even with capitulation signals, there is no guarantee that the market has bottomed, as the duration of the bear market may exceed the financial capacity of those buying the dip.
Speculation on Hedge Fund Leveraged Liquidations
Parker White proposed a hypothesis about the root cause of this volatility. He stated that since Bitcoin and stocks fell simultaneously, and the liquidation volume on centralized finance platforms was relatively low, he suspects the volatility originated from large IBIT holders, likely one or more non-crypto hedge funds.
Data shows that some funds, even with extremely high positions in IBIT, even if they are single-asset funds, are designed to isolate margin risk. Silver also plummeted on Thursday, and the unwinding of yen carry trades accelerated, increasing market pressure and further impacting the leveraged positions of funds.
Parker White believes these funds may have attempted to reverse the situation through highly leveraged options trading, but losses continued to widen, and the decline in Bitcoin may have ultimately wiped out their positions. He noted that due to delays in 13F report disclosures, relevant position information is expected to be released only in mid-May, but the scale of the event is so large that it will be difficult to hide for long.
As the preferred investment vehicle for institutions seeking cryptocurrency exposure through regulated products, IBIT's abnormal trading activity may reveal the pressure institutional investors are facing in the current market environment.
