Bitcoin (BTC) experienced one of the biggest sell-offs over the past month, sliding more than 40% to reach a year-to-date low of $59,930 on Friday. It is now down over 50% from its October 2025 all-time high near $126,200.
Key takeaways:
– Analysts point to Hong Kong hedge funds and ETF-linked U.S. bank products as possible drivers of BTC’s crash.
– Bitcoin could slip back below $60,000, putting the price closer to miners’ break-even levels.
Hong Kong hedge funds behind BTC dump?
One popular theory suggests the crash began in Asia, where some Hong Kong hedge funds were placing large, leveraged bets that Bitcoin would keep rising. These funds reportedly used options tied to Bitcoin ETFs like BlackRock’s IBIT and financed those positions by borrowing cheap Japanese yen, then swapping yen into other currencies and risky assets, including crypto, hoping for further gains.
When Bitcoin stopped rising and yen borrowing costs increased, those leveraged positions deteriorated. Lenders demanded more collateral, forcing rapid asset sales that amplified the price decline.
Parker White, COO and CIO of Nasdaq-listed DeFi Development Corp. (DFDV), highlighted record IBIT volume and options premium trading on a single day alongside synchronized declines in BTC and other tokens, suggesting concentrated, leveraged positioning played a role.
Morgan Stanley caused Bitcoin selloff: Arthur Hayes
Former BitMEX CEO Arthur Hayes has advanced another explanation: banks, including Morgan Stanley, may have been forced sellers to hedge exposure from structured notes tied to spot Bitcoin ETFs such as IBIT. These notes often give clients payoff structures with barriers or principal protection. When BTC breaches key levels, dealers must delta-hedge by selling underlying BTC or futures.
That hedging creates “negative gamma”: as prices fall, hedging-related selling accelerates, turning dealers from liquidity providers into forced sellers and magnifying downward moves. A noted Morgan Stanley product that referenced a level near $78,700 is cited as an example where such dynamics could trigger dealer selling.
Miners shifting from Bitcoin to AI
A third theory is a miner exodus to AI data center operations. Growing demand for AI infrastructure reportedly lured some mining firms to repurpose capacity, contributing to a 10–40% drop in hash rate, according to analysts citing on-chain indicators. In December 2025, Riot Platforms announced a broader data center strategy and sold $161 million worth of BTC; more recently, miner IREN announced a pivot to AI data centers.
Hash Ribbons flashed a warning as the 30-day hash-rate average slipped below the 60-day, a negative inversion that historically signals miner income stress and raises capitulation risk. Estimates put the average electricity cost to mine one BTC at about $58,160 and net production expenditure near $72,700. If BTC falls back below $60,000, miners could face meaningful financial pressure.
Long-term holders also look more cautious: wallets holding 10 to 10,000 BTC now control their smallest share of supply in nine months, indicating trimming rather than accumulation.
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