The culprit behind Bitcoin's plunge on Thursday: massive IBIT-related leveraged options were forcibly liquidated?

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BlackRock's spot Bitcoin ETF set a new record for trading volume on Thursday. Market participants suspect this volatility may stem from forced liquidations of highly leveraged IBIT positions held by hedge funds.

According to Nasdaq data, BlackRock's spot Bitcoin ETF product IBIT saw trading volume exceed 284 million shares on Thursday, with a nominal value surpassing $10 billion, an increase of 169% over the previous record. Meanwhile, IBIT’s price plunged 13% to around $36, marking a new low since October 2024, and expanding its year-to-date decline to 27%.

The record trading volume accompanied massive redemptions and panic in the options market. According to SoSoValue data, IBIT’s redemptions for the day reached $175 million, accounting for 40% of the $434 million total net outflows from 11 Bitcoin ETFs. In the options market, put option premiums exceeded call option premiums by more than 25 volatility points, hitting a new record.

According to BlockBeats, Parker White, CIO and COO of DeFi Dev Corp, stated on social media, he suspects the volatility stems from one or more non-crypto hedge funds with large IBIT holdings. These funds may have tried to turn the tide through highly leveraged options trading, but losses kept expanding, and ultimately Bitcoin's decline wiped out their positions entirely.

Extreme Trading Volume and Price

On Thursday, IBIT’s trading volume of 284 million shares far exceeded previous records. The last record was 169 million shares on November 21; this time’s volume is almost double that. CoinDesk reported that this volume's nominal value surpassed $10 billion.

In terms of price, IBIT once dipped below $35, its lowest level since October 11, 2024. The fund's price hit a peak of $71.82 last October and has fallen ever since. As the world’s largest publicly listed Bitcoin fund, IBIT holds physical Bitcoin and aims to closely track spot Bitcoin prices. Bitcoin itself fell to nearly $60,000 on Thursday.

The combination of record trading volume and steep price decline is usually seen as a signal of capitulation selling, where long-term holders concede and liquidate their positions even at a loss. This marks the most intense phase of a bear market sell-off and may indicate the start of a long and painful bottom-building process.

Options market data further confirms the panic. According to MarketChameleon, IBIT's long-term put option premiums on Thursday exceeded call premiums by more than 25 volatility points, reaching an all-time high. Put options are contracts used by investors to hedge downside risk.

Parker White noted that option premiums are about $900 million, also a new record. But according to CoinDesk, even if there are signs of capitulation, it doesn't guarantee the market has bottomed, as the bear market could last longer than buyers’ capital endurance.

Hedge Fund Leveraged Liquidation Speculation

Parker White speculated about the cause of the volatility. He noted that Bitcoin and stocks both fell, while centralized financial platform liquidations were relatively low. Thus, he suspects the volatility comes from large IBIT holders, possibly one or more non-crypto hedge funds.

Data shows some funds have extremely high IBIT positions, aiming to isolate margin risk even as single-asset funds. Silver also plunged on Thursday, yen carry trades accelerated unwindings, further increasing market pressure and impacting leveraged fund positions.

Parker White believes these funds likely tried to reverse their losses through highly leveraged options trading, but the losses continued to expand, and ultimately Bitcoin's decline completely wiped out their positions. He pointed out that, due to the delay 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 is difficult to hide for long.

As the preferred investment tool for institutions seeking crypto exposure via regulated products, any abnormal trading activity in IBIT may reveal the pressures institutional investors face under current market conditions.

Risk Warning and DisclaimerThe market involves risk, and investment must be cautious. This article does not constitute personal investment advice and does not take into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their own circumstances. Investments made based on this article are at the user's own risk. ```