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The primary role in the cryptocurrency market decline was played by risk management mechanisms of large corporate investors, suggested Jeff Park, advisor at Bitwise.
The specialist claims that the sharp asset sell-off is driven by hedge funds using multiple investment strategies. They were forced to carry out a mass sale of cryptocurrencies to comply with their internal risk assessment models. According to the expert, approximately one-third of all Bitcoin ETF shares belong to corporate investors, of which about 50% are hedge funds. Park characterized such funds as “hot money,” which is not intended for long-term investment and can be quickly withdrawn in case of increased financing costs or reduced business margin.
Risk managers in hedge funds often decide to close positions urgently when volatility increases sharply. The widening of spreads and the impact of correlations with growth stocks force them to immediately reduce investment volumes, insists the Bitwise advisor.
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“Selling in conditions of such low liquidity is typical behavior for risk closure, which we are observing today,” the analyst noted.
Park emphasized that Bitcoin’s implied volatility (IV) rose to 75% — a level not seen since the launch of spot ETFs in early 2024. This, in his opinion, became the main catalyst for forced sales: corporate participants are simply afraid to risk holding an unstable asset in their portfolios. For the first time in a long time, Bitcoin volatility has exceeded gold volatility — this could put an end to the period of low volatility that attracted corporate investors with high leverage levels, the expert noted.
Against the backdrop of a significant market drop, Park maintains an optimistic view of medium-term prospects. He is confident that the current difficulties are a necessary stage of “market cleansing” from excessive leverage and weak players. At the same time, he expects a rapid growth in Bitcoin.
On Friday, February 6, the Bitcoin price fell to $60,255.
