MarketsBitcoin
|5 min ReadBitcoin Flash Crashes: $10B IBIT Volume Explodes
Tariq Al-Saidi
Senior Analyst
Published
Feb 9, 2026
The market just witnessed a historic anomaly. On February 5th, Bitcoin Flash Crashed 13.2% in a violent liquidity event. However, the on-chain and ETF data reveals a shocking divergence: while price collapsed, the BlackRock Bitcoin ETF (IBIT) recorded Net Inflows, absorbing approximately 6 million new shares.
This wasn't a sell-off; it was a Liquidation Cascade triggered by traditional finance (TradFi) plumbing.
The "Paper Hands" Panic
The crash coincided with one of the most violent days in capital markets. IBIT smashed its volume records (2x prior highs at $10Bn+), but the options activity was highly unusual. The volume was led by Puts, indicating heavy hedging rather than organic dumping.
The "Pod Shop" De-Grossing Event
Our analysis aligns with Goldman Sachs' Prime Brokerage data, which flagged February 4th as a "3.5 z-score" deleveraging event—a catastrophe that happens statistically once every decade.
Multi-strategy hedge funds ("Pod Shops") were forced to De-Gross indiscriminately. Bitcoin, now highly correlated with software equities and risk assets, became a source of liquidity. When risk managers tap the shoulder, funds sell what they can, not what they want.
The "Basis Trade" Unwind
The smoking gun for this crash is the CME Basis Trade (Long Spot / Short Futures). As funds scrambled for cash, the spread on near-dated futures exploded from 3.3% to 9% overnight.
This confirms that giants like Citadel and Millennium were likely forced to unwind their basis trades. To close the trade, they must buy back futures and Dump Spot Bitcoin. This mechanical selling pressure crushed the price, unrelated to Bitcoin's actual value.
The "Gamma Squeeze" Trap
Adding fuel to the fire were Structured Products. Dealers were caught in a "Knock-In" barrier event around the $43.6k level.
As Bitcoin price dipped, it triggered these barriers, forcing market makers into a "negative vanna" spiral. To hedge, dealers had to aggressively short IBIT, exacerbating the crash. This created a Feedback Loop of selling that had nothing to do with sentiment and everything to do with math.
The dealer positioning shows they were short gamma in the 71k range, leaving them exposed when the floor fell out.
The Recovery Signal
On February 6th, Bitcoin staged a heroic recovery. Crucially, CME Open Interest (OI) expanded faster than Binance OI. This suggests that as the Basis Trade stabilized, institutional value buyers returned to take advantage of the discount.
BitNews Analyst Verdict
Verdict: Bullish.
Prediction: The sell-off was a mechanical "clearing event" for TradFi leverage. With the Basis Trade reset and IBIT seeing inflows during the dip, we predict a Vertical Squeeze to $65k as dealers chase price to re-hedge upside exposure.
FAQ
Q: Why did Bitcoin drop if ETFs were buying?
A: The drop was caused by a "Basis Trade" unwind. Hedge funds had to sell Spot Bitcoin to close arbitrage positions, which temporarily overpowered the ETF inflows.
Q: Is this a "Rug Pull" by institutions?
A: No. This was a forced "Margin Call" due to stock market volatility. The fact that BlackRock's IBIT saw net inflows during the crash proves institutions are actually accumulating, not leaving.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.