Bitcoin (BTC) experienced one of the biggest sell-offs over the past month, falling more than 40% to hit a year-to-date low of $59,930 on Friday. It is now down more than 50% from its October 2025 all-time high, near $126,200.
Key takeaways:
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Analysts point to Hong Kong hedge funds and US banking products linked to ETFs as possible drivers of the BTC collapse.
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Bitcoin could fall back below $60,000, bringing the price closer to miners’ equilibrium levels.
Are Hong Kong Hedge Funds Behind the BTC Dump?
One popular theory suggests that Bitcoin’s drop last week may have originated in Asia, where some Hong Kong hedge funds were making substantial, leveraged bets that BTC would continue to rise.
These funds used options tied to Bitcoin ETFs like BlackRock’s IBIT and paid off those bets by borrowing cheap Japanese yen, according to Parker White, chief operating officer and CIO of Nasdaq-listed DeFi Development Corp. (DFDV).
They exchanged that yen for other currencies and invested in risky assets like cryptocurrencies, hoping the prices would rise.
This was the highest volume day in $IBITnever before, by a factor of almost 2 times, trading today for $10.7 billion. Additionally, approximately $900 million in options premiums were traded today, also the highest figure ever for IBIT. Taking into account these facts and the way $BTC and $SOL priced lower today (normally…
-Parker (@TheOtherParker_) February 6, 2026
When Bitcoin stopped rising and yen borrowing costs rose, those leveraged bets quickly failed. Lenders then demanded more cash, forcing funds to sell Bitcoin and other assets quickly, exacerbating the price decline.
Morgan Stanley Triggered Bitcoin Sell-Off: Arthur Hayes
Another theory gaining traction comes from former BitMEX CEO Arthur Hayes.
He suggested that banks, including Morgan Stanley, may have been forced to sell Bitcoin (or related assets) to hedge their exposure in structured notes linked to spot Bitcoin ETFs, such as BlackRock’s IBIT.
These are complex financial products in which banks offer their clients bets on the price behavior of Bitcoin (often with principal protection or barriers).
When Bitcoin falls sharply, surpassing key levels like around $78,700 in a well-known Morgan Stanley product, traders must hedge delta by selling underlying BTC or futures.
This creates a “negative gamma,” meaning that as prices fall further, hedge sales accelerate, turning banks from liquidity providers to forced sellers and exacerbating the crisis.
Miners move from Bitcoin to AI
Less prominent but circulating is the theory that the so-called “mining exodus” may have also fueled Bitcoin’s downtrend.
In a post on Saturday
For example, in December 2025, Bitcoin miner Riot Platforms announced its shift toward a broader data center strategy, while selling $161 million worth of BTC. Last week, another miner, IREN, announced its pivot into AI data centers.
Related: Crypto Stress Test Hits Balance Sheets as Bitcoin and Ether Collapse
Meanwhile, the Hash Ribbons indicator also issued a warning: the 30-day average hash rate has fallen below the 60-day average, a negative reversal that historically signals acute stress on miners’ income and increases the risk of capitulation.
As of Saturday, the estimated average electricity cost to mine a single Bitcoin was around $58,160, while the net production expense was approximately $72,700.
If Bitcoin falls below $60,000 again, miners could start to experience real financial stress.
Long-term holders also appear more cautious.
The data shows that wallets holding between 10 and 10,000 BTC now control their smallest portion of supply in nine months, suggesting this group has been trimming exposure rather than accumulating it.
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