Bitcoin took a big hit on Feb. 5 (down 13.2%), and Jeff Park’s take is not very clear: this did not look like a crypto topic. It looks like tradfi pipelines: margin, derivatives, and ETF machines, moving through Bitcoin ETFs, and BlackRock’s IBIT in the middle. Here’s the weird part: the flow didn’t show the massive redemption you’d expect on such a day.
Why Did Bitcoin Crash On February 5th?
Park starts with the ETF tape in his X post from Feb. 7. IBIT, he said, had record volume—“2x previous highs, 10B+”—and options were going well, with contract counts at launch. And unlike previous spikes in options interest, he says this one is heavily weighted, based on a clear volume imbalance.
That time is important. It came in handy as markets were taking a hit across the board. Park cited Goldman’s chief consumer desk as saying on Feb. 4 is one of the worst daily performance events for mutual funds, about a 3.5 z-score—basically a “0.05% event” in his framing. When that happens, pod-shop risk managers step in and tell everyone the same thing: get rid of the bad, fast. Park frames on Feb. 5 as the second leg of that forced negligence.
But the flow data didn’t match the obvious story. He points to previous IBIT withdrawals where he saw real redemptions: Jan. 30 for about $530 million in net outflows after a day down 5.8%, and Feb. 4 is about $370 million in losses. On a -13% day, you would think you would see $500M–$1B in output. He didn’t.
Instead, Park points to total creation: about 6 million new IBIT shares were created, adding about $230 million to AUM. And the entire Bitcoin ETF space has been great too—$300M+. “That’s confusing,” he wrote. His point: maybe it wasn’t one thing.
Transmits First, Then Short-Gamma Mechanics
His main claim: the trigger was not crypto-native. “The reason for the sell-off was that there was a broad transfer of funds across the funds/portfolios of many assets due to the high correlation of risky assets reaching statistically abnormal levels,” he wrote. In his opinion, that removed the aggressive risk that included Bitcoin, even if most of the exposure was called “delta neutral”: basic trading, RV against crypto equities, and other setups that include delta for all traders.
After that, hedge mechanics took over. “This pullback then triggered a short gamma run that had a negative effect,” he wrote, saying traders should sell IBIT as their hedges reset. And because it happened so quickly, he thinks market makers ended up short Bitcoin without managing the inventory in a “normal” way. That would mute what you would see as a large ETF outflow from the tape.
He also notes how closely IBIT tracked software equity and other risk assets in the weeks leading up to the downturn. In his framework, the software-led selloff is the pure spark here: golden news, sure, but not very relevant to the multi-strat-backed trading he’s talking about.
One strong datapoint he relies on is the CME base. Using a dataset that Anchorage Digital Head of Research David Lawant said, Park said the CME BTC’s most recent base is down from 3.3% in Feb. You read that as a compulsion to free up basic trading with multi-strat big stores (selling spot, buying futures).
As an additional fuel, it brings systematic products: knock-ins and prevention levels. Not really a driver, but something that can make fast movements worse. He mentioned a JPM note priced in November with a barrier “right at 43.6,” and argued that if the same notes were printed later as a BTC slide, the barriers could meet around “38-39.”
That’s the kind of place where a quick selloff can flip the fence into a cascade. If barriers break, a negative vanna and a rapidly changing gamma can force traders to sell hard and weak. He also notes that volver covers about 90% of his definition.
Why Bitcoin bounced back on Feb. 6
The February 6th park frames “heroic 10%+ recovery” as a location reset. CME’s open interest increased faster than Binance’s. He says the CME OI has folded since Feb. 4 to Feb. 5 (supporting the idea of exhausting the air), then recovered as the players went back to setting the relative value.
According to him, the ETF creates/redeems can look flat if the basic trade is rebuilt, even if the price remains heavy because the crypto-native leverage and short-gamma exposures-usually in offshore areas-are still coming out.
Bottom line, in his opinion: this may not have been “basic” at all. It was pipelines: de-risking a lot of assets, and then there were feedback loops that made it worse. If ETF income continues to come in without a corresponding expansion in underlying trading, he says, that’s a clear signal of real demand, less dealer resale, more sticky buyers.
At press time, BTC traded at $70,649.
The featured image was created with DALL.E, a chart from TradingView.com
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