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Participants on X are attributing bitcoin’s decline to a range of factors, including a collapse of a Hong Kong fund, yen funding challenges, and concerns over quantum security, as the situation develops into a significant absence of clear narratives.
Key Points:
- Bitcoin has dropped nearly 30% within a week to about $60,000, leading to speculation that the sell-off was triggered by a significant, potentially Asia-based non-crypto entity facing forced liquidations rather than typical market fluctuations.
- Traders and analysts have proposed various theories, such as a sovereign or exchange unloading billions in bitcoin or a complicated unwinding of leveraged carry trades and options connected to BlackRock’s IBIT spot bitcoin ETF.
- This decline has reignited discussions regarding bitcoin’s long-term security, with some industry experts suggesting that lower prices may be necessary to prompt substantial action on quantum resistance as liquidity decreases and market sentiment reaches post-FTX lows.
Bitcoin’s decline to nearly $60,000 on Thursday, representing a nearly 30% decrease over the past week, has led traders on X to speculate that the sell-off was influenced by multiple factors, not just macroeconomic or risk-off sentiments, contributing to the asset’s most significant single-day drop since the FTX collapse in 2022.
Flood, a notable crypto trader, described the situation in a post on X as the most severe selling he has witnessed in years, characterizing it as “forced” and “indiscriminate,” and suggesting possibilities ranging from a sovereign entity liquidating billions to a significant exchange facing balance sheet issues.
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Some theories include: – A secret sovereign unloading over $10B (Saudi/UAE/Russia/China) – An exchange collapse, or an exchange with tens of billions of dollars of bitcoin on its balance sheet forced to sell for various reasons.
Franklin Bi, a general partner at Pantera Capital, presented a more comprehensive theory. He speculated that the seller could be a significant Asia-based entity with few crypto-native counterparties, suggesting that the market would not easily identify them.
I suspect it is not a crypto-centric trading firm but a large entity outside of crypto, probably based in Asia, with very few crypto-native counterparties. This explains why no one has identified them in the community. They were comfortably leveraged and market-making on Binance –> JPY carry trade unwinding –> a liquidity crisis ensued –> a 90-day reprieve granted –> an unsuccessful attempt to recover losses in gold/silver trading –> desperate unwinding occurred this week.
In his perspective, the sequence of events may have initiated with leverage on Binance, then deteriorated as carry trades unwound and liquidity diminished, with an unsuccessful effort to recover losses in gold and silver exacerbating the forced unwinding this week.
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However, the more distinctive narrative emerging from the crash pertains to security issues.
Charles Edwards from Capriole posited that declining prices might finally compel significant focus on bitcoin’s quantum security vulnerabilities.
Edwards emphasized his seriousness when he cautioned last year that bitcoin’s price might need to decrease further to motivate meaningful action, referring to recent developments as the first “promising progress” he has observed thus far.
$50K is not far off now. I was serious when I mentioned last year that the price would need to decrease to encourage proper attention to bitcoin’s quantum security. This marks the initial promising progress we have seen to date. I sincerely hope Saylor is committed to establishing a well-funded Bitcoin Security team.
He would possess considerable influence across the network to drive change. I am concerned that his recent statement may be a distraction, aimed at downplaying growing quantum security fears without taking substantial action, but I hope I am mistaken. There is significant work ahead, and it must be completed by 2026.
Parker White, COO and CIO at DeFi Development Corp., noted unusual activity in BlackRock’s spot bitcoin ETF (IBIT) as a potential factor behind Thursday’s washout.
He pointed out that IBIT recorded its highest trading volume day at $10.7 billion, alongside a record $900 million in options premium, suggesting that the pattern aligns with a significant options-driven liquidation rather than a standard crypto-native leverage unwinding.
Lastly, I have anecdotal evidence that several hedge funds based in Hong Kong hold $DFDV, which experienced its largest single-day decline, leading to a notable decrease in mNAV. The mNAV had surprisingly maintained stability throughout this pullback until today. One or more of these funds could be linked to the IBIT situation, as I highly doubt a fund taking such a large position in IBIT would operate under a single entity structure.
It is easy to envision how these funds could have been engaging in a leveraged options trade on IBIT (consider far OTM calls = extremely high gamma) with borrowed capital in JPY. The events on October 10th could have severely impacted their balance sheet, prompting them to increase leverage while waiting for the “obvious” rebound. As losses mounted, combined with rising funding costs in JPY, it is plausible that these funds became increasingly desperate and turned to the silver market. When that strategy failed, the situation became critical, culminating in this last push in BTC.
“I lack definitive evidence, only some hunches and clues, but it appears to be quite plausible,” White conveyed on X.
Bitcoin’s decline over the last week has not been characterized by a gradual descent but rather by abrupt drops, with sharp intraday fluctuations taking the place of the orderly dip-buying observed earlier in the year.
This shift has brought BTC back toward levels not seen since late 2024, while liquidity has appeared scarce across major platforms. With altcoins facing increased pressure and sentiment plummeting to post-FTX levels, traders are now viewing each rebound with skepticism until flows and positioning visibly reset.
