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Listen everyone Feb 5 wasn’t a “crypto panic.” It was TradFi deleveraging.
Bitwise advisor Jeff Park says the Feb 5 crypto selloff wasn’t driven by crypto-native fear. It was a multi-asset portfolio deleveraging event — the kind where funds cut risk everywhere, and crypto gets hit like a high-beta asset.
This is why the move felt so violent and “indiscriminate.”
What actually caused the bloodbath
According to Park, a big driver was pod shops and multi-strategy funds de-grossing across portfolios. When risk managers hit the brakes, these funds don’t sell “just one thing.” They cut exposure across the board fast.
Goldman Sachs’ prime brokerage desk reportedly flagged Feb 4 as one of the worst daily performances for multi-strategy funds, with a z-score of 3.5 a rare outcome that suggests serious stress inside systematic and multi-asset positioning.
The CME basis trade unwind was a major accelerant
Park pointed to the CME basis trade as a key mechanism behind the sell pressure.
The near-dated basis reportedly jumped from ~3.3% (Feb 5) to ~9% (Feb 6) one of the biggest moves since ETFs launched. When that trade unwinds, it can force funds to sell spot and buy futures at scale, creating sharp downside pressure even if “retail sentiment” isn’t the core problem.
He also noted the catalyst likely started in software equity selloffs, not crypto-specific headlines which lines up with the idea that BTC has been trading more like a risk asset inside multi-asset books.
Why it dumped hard even with ETF inflows
Here’s the part most people miss: BTC fell ~13.2%, but IBIT still recorded strong activity, including ~$10B in trading volume (a reported record) and ~$230M in net creations, adding around 6M shares. Total ETF inflows reportedly stayed above $300M.
So the tape looked like “crypto is dead,” but under the hood, this was more about forced positioning unwind than “everyone suddenly hates Bitcoin.”
Options and structured products made it worse
Park also highlighted how structured products and options dealer positioning can turn a drop into a waterfall.
Barrier-style structures (like knock-in features) can trigger accelerated hedging once price hits certain zones. At the same time, weeks of put activity meant many dealers were positioned short gamma — which forces them to hedge in a way that adds fuel to the downside as price falls.
That’s how you get a dump that feels mechanical: not emotional, just flows.
Bottom line
Feb 5 looked like a crypto crash, but the explanation is simpler:
TradFi de-risking hit multi-asset funds → basis trades unwound → short gamma hedging amplified the drop.
When big money is forced to cut exposure, crypto doesn’t get a special treatment. It gets sold like everything else.
Not financial advice