TLDR
- Institutional hedge funds caused Bitcoin’s steep drop through aggressive selling.
- Bitcoin’s volatility hit 75%, prompting forced selling and risk management moves.
- Hedge funds’ “fast money” flow led to Bitcoin’s sharp decline amid low liquidity.
- Bitwise Advisor expects a fast recovery after clearing out leveraged positions.
On February 6, 2026, Bitwise Advisor Jeff Park offered an analysis of the recent massive drop in the value of Bitcoin (BTC), which fell to as low as $60,000. According to Park, institutional risk management is the key factor behind the crash, especially driven by multi-strategy hedge funds needing to adjust their risk positions. This forced the market into a rapid and substantial sell-off.
Park pointed out that the downturn could be attributed to a broad “fast money” flush, where institutional investors, particularly hedge funds, were compelled to sell large amounts of Bitcoin quickly due to increasing risk levels. These funds, holding a significant portion of Bitcoin ETF shares, reacted to rising volatility by unwinding positions to comply with internal risk models.
Institutional Hedge Funds and Aggressive Selling
According to Jeff Park, hedge funds, which own approximately 50% of Bitcoin ETF shares, engaged in aggressive selling to manage rising risks. He explained that these funds primarily focus on delta-hedged or relative value trades, rather than long-term Bitcoin investments. When volatility spiked, the pressure on these funds increased, forcing them to sell off their positions.
This aggressive behavior by hedge funds helped drive Bitcoin’s price down rapidly. Park emphasized that the massive turnover seen in Strategy (MSTR) stock was evidence of such institutional moves, highlighting how hedge funds reacted to market conditions by immediately selling off assets. This type of behavior, known as “shutting risk down,” is common during periods of heightened volatility, especially when liquidity is low.
Bitcoin’s Volatility Spikes to 75%
Bitcoin’s implied volatility (IV) surged to a level of 75%—the highest since the launch of Bitcoin spot ETFs in early 2024. This increase in volatility played a key role in triggering forced selling by institutional investors. The volatility spike surpassed gold’s volatility for the first time in recent memory, signaling a shift in investor sentiment and risk tolerance.
Park noted that while this volatility spike is painful for investors in the short term, it is a necessary process for Bitcoin’s market. He suggested that clearing out leveraged positions and weak hands is part of the cycle that could eventually lead to a rapid recovery in Bitcoin’s price. Despite the ongoing sell-off, Park remains optimistic that Bitcoin will rebound quickly once the current instability passes.
The Fast Money Flow and Market Liquidity
As Bitcoin’s price declined, liquidity in the market became a major factor. The “fast money” flow from institutional players added significant volatility, as these funds are quick to enter and exit the market in response to changing conditions. When the cost of funding or margin requirements increased, these funds faced the necessity of selling off their positions.
This behavior was observed across other assets, as well, with the sell-offs happening quickly and in large volumes. Park highlighted how such market conditions force institutional players to act swiftly, further driving the downward momentum in Bitcoin’s price.
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