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105 sats \ 5 replies \ @Scoresby OP 6 Feb \ on: IBIT, Hong Kong hedge funds, silver, JPY, Oct 10 and you econ

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Addition to the "HK Fund" hypothesis.

I have a hunch that much of the "OG Bitcoiner Selling" this summer was actually not selling. On July 29, '25, the SEC finally allowed the Bitcoin ETFs to accept in-kind creation/redemption. This was a big point of contention when the ETFs originally launched under Gensler if you remember.

One of the HUGE benefits to IBIT over native BTC is the liquid options market. IBIT has one of the most liquid options markets on the planet, entirely dwarfing that of native BTC.

In fact, the IBIT options market is THE FOURTH most liquid options market on planet earth, only behind SPY, QQQ, and the SPX index options. WOW.

I know for a fact that at least one mega OG Bitcoiner runs his entirely family office around Bitcoin covered call writing to generate income to fund other ventures. This is a fairly common income strategy for any high growth asset, so my guess would be that lots of OG Bitcoiners engage in this strategy.

The in-kind creations/redemptions allow for the deposit and withdrawal of native bitcoin into IBIT on a potentially tax-free, zero slippage basis, making it a complete no brainer for anyone wanting to run any kind of options strategy against their BTC stack.

So, this would explain (a) the massive surge in OG coins moving this summer and (b) the complete collapse in realized vol, implied vol, and volume on BTC in general, as this heavy options writing squeezed all of the juice out of IBIT ivol and therefore realized vol and ultimately volume.

Playing this out a little further. If the fund(s) that blew up was actually associated with an OG Bitcoiner (quite a secretive bunch that don't like to be noticed and are good at privacy), they could have been massively selling vol against their newly minted stack of IBIT, which worked until Oct 10 blew out anyone shorting vol and ultimately created a problem for the fund(s) that ultimately kicked things off. This could have ultimately spiraled as @RyanTheGentry pointed out.

Again, just a hypothesis and some bread crumbs, no concrete proof, yet.
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5 sats \ 3 replies \ @Scoresby OP 6 Feb
Another interesting aspect to support the hypothesis is the realized volatility regime. This summer, realized vol on $BTC (and $IBIT) completely collapsed to its absolute lowest levels on record. This was due to a massive short vol position built up in IBIT. Remember, IBIT is the FOURTH most liquid options market in the world behind SPY, QQQ, and SPX Index options.

That short vol position massively compressed the price, which lowered volume and created a powder keg. Then on Oct 10, it completely blew up.

If the fund(s) were shorting vol heavily (as any OG Bitcoiner looking to generate income on their stack would do) and maybe didn't have proper risk controls in place, then Oct 10 could have blown a hole in their balance sheet, which kicked off the spiral.

Then today, ivol completely blew out, hitting FTX blowup levels. This would have completely obliterated anyone with a short vol position that was maybe hoping for a recovery to avoid realizing a massive loss on a short vol position.

It is very obvious today that some capitulated and/or completely died, i.e. the fund(s) being liquidated.

This would also explain the 2x spike in ivol today from yesterday on the 1DTE tenor, with very steep ivol decay across the following days/weeks as all of the pressure was concentrated in that one tenor.

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50 sats \ 1 reply \ @Scoresby OP 7 Feb

still more

Part 2: 🚨 The Leveraged Atomic Bomb

Here we go – this part of the story is getting even hotter!

On January 7, Nasdaq files with the SEC to remove the 25,000-contract limits for #Bitcoin and #Ethereum ETF options. On January 21, it becomes effective. Immediately. Without the usual 30-day waiting period. On January 29, #Bitcoin crashes.

I posted about it at the end of January and asked: “Are these new tools being used to buy or to hedge?” Now we know the answer – and it’s worse than both options.

Nasdaq is not an organization that rushes things. They know exactly what unlimited options contracts mean. Yet they push for immediate implementation. Right in the middle of weak crypto markets.

One possible explanation currently being discussed on CT: One or several funds have already been underwater since October. A Prime Broker needed the limits gone to even be able to liquidate the positions. The old caps would have blocked it.

I don’t know if that’s true. But the timeline fits together suspiciously well.

What I do know: Since January 21, there are no more guardrails on IBIT options. @TheOtherParker_ himself calls it a “leveraged atomic weapon without seatbelts”.

And that’s exactly what we saw yesterday. $10.7B volume. $900M in options premium. Both all-time records. A single day produced more IBIT volume than most weeks combined.

The crypto market has changed. The risk epicenter is no longer at Binance or Bybit. It’s at IBIT. And there are no limits anymore.

The question that remains: Was the removal of the limits the rescue for a Prime Broker – or the accelerant for the next blow-up?

I’ll keep tracking this. If I’m right, the proof will show up in the 13F filings in mid-May.

Follow along – Part 3 coming! 🤝
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0 sats \ 0 replies \ @nitter 7 Feb
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0 sats \ 0 replies \ @nitter 6 Feb
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