IBIT Options Meltdown: Inside the $10B ‘Hedge Fund Blowup’ Theory
A record $900M in IBIT options premiums and a $10B volume spike fuel rumors of a TradFi hedge fund liquidation dragging Bitcoin to $60k.
Options trading on BlackRock’s iShares Bitcoin Trust (IBIT) turned into a liquidity black hole Thursday, churning a record 2.33 million contracts and $900 million in premiums as Bitcoin violently repriced toward $60,000. While the token has since rebounded to $71,000, the mechanical breakage behind the crash points to a rumored TradFi casualty.
The $900 Million Receipt
The numbers from Thursday’s session are statistical outliers. IBIT traded 284 million shares, over $10 billion in notional value, while plunging 13%. This wasn’t standard profit-taking. Market data revealed put options trading at a historic premium (25 volatility points) over calls, a signal of frantic, price-agnostic hedging.
"The scale of options activity suggests a blowup scenario… a single fund or group of funds scrambling to manage their risk.", Parker White, CIO at DeFi Dev Corp
The working theory, circulated by analysts including White, is that a non-crypto hedge fund leveraged long positions via IBIT calls, only to be forced into a disorderly unwind as spot prices broke key supports. Unlike native crypto derivatives, which liquidate programmatically, this sell-off bore the fingerprints of a manual risk desk liquidation: massive volume, zero price sensitivity, and a cascading effect on the underlying spot market.
Regulatory Bottlenecks
The liquidity crunch was likely exacerbated by artificial constraints. Just last month, the SEC delayed its decision on increasing IBIT position limits from 250,000 to 1 million contracts until February 24, 2026. With position limits capped, market makers lacked the headroom to absorb the toxic flow efficiently, widening spreads and accelerating the downside velocity.
Institutional Fallout
This event serves as the first live fire stress test for the "Bitcoin via ETF" thesis. While IBIT successfully processed the volume without halting, the volatility bleed-through confirms that TradFi rails can amplify, rather than dampen, crypto’s inherent jaggedness. Traders are now eyeing the upcoming 13F filings in May to identify the carcass of the fund that capitulated.
