Panic gripped crypto markets on February 5, 2026, as Bitcoin plummeted 13% in its worst single-day crash since June 2022. The flagship cryptocurrency bottomed out at $60,255, erasing almost all gains made since the launch of Bitcoin ETFs. Not just Bitcoin – Ether and other digital assets got absolutely hammered too. A staggering $26 billion in positions liquidated in just 24 hours. Ouch.
Jeff Park, advisor at Bitwise, isn’t buying the usual crypto-specific doom narratives. This wasn’t about regulation or hacks or whatever crypto-Twitter is screaming about. No, Park points to a broader multi-asset deleveraging tsunami. Institutional players – specifically multi-strategy hedge funds – went into full-blown panic mode. Their risk managers fundamentally said, “Sell everything now, ask questions later.”
Looking beyond crypto-centric panic narratives to see the real culprit: institutional deleveraging and risk manager meltdowns.
The numbers back him up. February 4 was catastrophically bad for multi-strategy funds – a statistical three-and-a-half-sigma event with just 0.05% probability. Goldman Sachs called it ten times rarer than a three-sigma event. That’s finance-speak for “holy crap.”
The chaos rippled through multiple channels. CME basis trades unwound violently, with near-dated basis exploding from 3.3% to 9% overnight. Funds dumped spot Bitcoin while grabbing futures. Classic deleveraging death spiral stuff.
Then there’s the short gamma problem. Market makers sold IBIT and shorted Bitcoin without inventory. When prices crashed through key levels, structured product barriers triggered even more selling. Remember those JPMorgan notes with $43,600 barriers? Yeah, those.
Bitcoin implied volatility shot up to 75%, its highest since ETF launch. The Fed’s rate-cut pause didn’t help, nor did the hawkish nomination of Kevin Warsh.
Still, Park remains oddly optimistic. ETFs showed no net outflows – IBIT even saw positive inflows on February 6. Despite the market chaos, IBIT recorded an unprecedented 10 billion in trading volume, doubling its previous high.
Park’s take? This painful process is just part of Bitcoin’s path to new highs. Experienced investors who practiced proper portfolio diversification were better positioned to weather the storm without panic selling. Tell that to Strategy, which reported a $12.4 billion net loss from unrealized crypto holdings. The crash pushed Bitcoin below Strategy’s average purchase price for the first time in over two years. Some path.
