The massive “explosion” of BlackRock’s IBIT options suggests that the February 5th crash was a derivatives-driven event.
Multiple “breadcrumbs” refer to certain Hong Kong-based funds.
New evidence suggests that sophisticated trading partners executed a “big short” style play.
Bitcoin didn’t just drop on February 5th. Something broke. And most of the crypto market was looking in the wrong place.
Parker White, chief investment officer at DeFi Development Corp., shared a detailed breakdown on the podcast Unchained with Laura Shin. Since then, his theory has spread rapidly.
According to White, the explosion of hedge funds within BlackRock’s IBIT options market is what has caused Bitcoin to decline since October.
February 5th was no ordinary Bitcoin crash.
On February 5th, Bitcoin fell from about $70,000 to $63,000. On the same day, BlackRock’s IBIT ETF hit its highest trading volume in history.
But here’s the problem. Spot Bitcoin trading volume and perpetual swap trading volume were not unusually high. The stress was exclusively on IBIT options, with short-term implied volatility spiking. White said this was indicative of an explosion in the options market rather than a broad spot decline.
Hong Kong fund caught in a trap
White’s theory focuses on a non-crypto Hong Kong hedge fund that was shorting Bitcoin volatility through IBIT options. The fund suffered significant losses when implied volatility spiked on October 10, but instead chose to double down on its positions.
Redemption demands from large investors bound by Hong Kong’s 90-day liquidation rules are likely to force a complete liquidation by early February.
“After speaking with multiple parties, we have become more confident that a Hong Kong-based fund that is a large holder of IBIT has failed.” Mr White previously said:
After speaking with multiple people, I am now more convinced that a Hong Kong-based fund that is a large holder of IBIT has failed.
At this point we move from hypothesis to prevailing theory. https://t.co/67XxlwZEGm
— Parker (@TheOtherParker_) February 8, 2026
Someone ran a “Big Short” on Bitcoin
White believes another fund has been quietly buying cheap puts since July, when volatility was near historic lows, as volume sellers were being crushed.
The playbook was simple. Pushing down Bitcoin price during weekend low liquidity. When the market opened on Monday, IBIT dealers were forced to hedge their overnight exposures with short sales, further widening the decline.
“Don’t get me wrong, in fact there was mention of a new billionaire crypto trader this week.” White pointed out.
what happens next
The deadline for submission to 13F is May 15th. If one or more of the concentrated Hong Kong-based IBIT holders are unable to maintain their positions, White believes it will be a decisive blow.
Until then, this theory remains unconfirmed, but the breadcrumbs can’t be ignored.
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