Arthur Hayes Explains How BlackRock IBIT Hedging Shaped Recent Bitcoin Sell-Off

TLDR: Dealer hedging from BlackRock IBIT structured notes amplified Bitcoin price swings at key triggers. Structured products with knock-ins, auto-callables, and buffers force automatic BTC market flows. Mapping issuance and barrier levels helps traders anticipate short-term Bitcoin price movements. Bitcoin volatility driven by flows often occurs independently of broader market sentiment shifts. BlackRock IBIT Bitcoin crash is drawing attention as Arthur Hayes connects dealer hedging and structured notes to BTC volatility. Traders face flows driven by automated mechanisms, not sentiment. Bitcoin is trading at $69,324.50, up 0.86% over the past 24 hours, supported by strong trading volume of $94.1 billion. Despite the short-term rebound, BTC remains down 16.56% over the past seven days, reflecting elevated volatility. Recent price action shows how short-term gains can occur even as broader pressure persists, with market flows and positioning continuing to influence Bitcoin’s near-term direction. Dealer Hedging Drives Bitcoin Volatility Structured products tied to BlackRock’s IBIT create complex hedging dynamics. Dealers sell these notes to clients and hedge the embedded options using BTC spot or futures. As positions grow, their rebalancing can directly influence prices. These notes often include auto-callables, knock-ins, and downside buffers. As BTC approaches key barriers, dealers must act. They buy when prices rise and sell when prices fall. This creates mechanical pressure that can resemble sudden market moves. Arthur Hayes explained that these flows are not directional bets. Instead, they are systematic hedging responses. $BTC dump probably due to dealer hedging off the back of $IBIT structured products. I will be compiling a complete list of all issued notes by the banks to better understand trigger points that could cause rapid price rises and falls. As the game changes, u must as well. pic.twitter.com/9DF8VE9XBL — Arthur Hayes (@CryptoHayes) February 7, 2...