Bitcoin (BTC) experienced on of the biggest sell-offs over the past month, sliding more than 40% to reach a year-to-date low of $59,930 on Friday. It is now down over 50% from its October 2025 all-time high near $126,200.
Key takeaways:
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Analysts are pointing to Hong Kong hedge funds and ETF-linked U.S. bank products as possible drivers of BTC’s crash.
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Bitcoin could slip back below $60,000, putting the price closer to miners’ break-even levels.
Hong Kong hedge funds behind BTC dump?
One popular theory suggests that Bitcoin’s crash this past week may have originated in Asia, where some Hong Kong hedge funds were placing substantial, leveraged bets that BTC would continue to rise.
These funds used options linked to Bitcoin ETFs like BlackRock’s IBIT and paid for those bets by borrowing cheap Japanese yen, according to Parker White, COO and CIO of Nasdaq-listed DeFi Development Corp. (DFDV).
They swapped that yen into other currencies and invested in risky assets like crypto, hoping prices would rise.
When Bitcoin stopped going up, and yen borrowing costs increased, those leveraged bets quickly went bad. Lenders then demanded more cash, forcing the funds to sell Bitcoin and other assets quickly, which exacerbated the price drop.
Morgan Stanley caused Bitcoin selloff: Arthur Hayes
Another theory gaining traction comes from former BitMEX CEO Arthur Hayes.
He suggested that banks, including Morgan Stanley, may have been forced to sell Bitcoin (or related assets) to hedge their exposure in structured notes tied to spot Bitcoin ETFs, such as BlackRock’s IBIT.
Source: XThese are complex financial products where banks offer clients bets on Bitcoin’s price performance (often with principal protection or barriers).
When Bitcoin falls sharply, breaching key levels like around $78,700 in one noted Morgan Stanley product, dealers must delta-hedge by selling underlying BTC or futures.
This creates “negative gamma,” meaning that as prices drop further, hedging sales accelerate, turning banks from liquidity providers into forced sellers and exacerbating the downturn.
Miners shifting from Bitcoin to AI
Less prominent but circulating is the theory that a so-called “mining exodus” may have also fueled the Bitcoin downtrend.
In a Saturday post on X, analyst Judge Gibson said that the growing AI data center demand is already forcing Bitcoin miners to pivot, which has led to a 10-40% drop in hash rate.
Source: XFor instance, in December 2025, Bitcoin miner Riot Platforms announced its shift toward a broader data center strategy, while selling $161 million worth of BTC. Last week, another miner, IREN, announced its pivot to AI data centers.
Related: Crypto’s stress test hits balance sheets as Bitcoin, Ether collapse
Meanwhile, the Hash Ribbons indicator also flashed a warning: the 30-day hash-rate average has slipped below the 60-day, a negative inversion that historically signals acute miner income stress and raises the risk of capitulation.
BTC Hash Riboon vs. price. Source: GlassnodeAs of Saturday, the estimated average electricity cost to mine a single Bitcoin was around $58,160, while the net production expenditure was approximately $72,700.
BTC/USD daily chart vs. production and electrical cost. Source: Capriole InvestmentsIf Bitcoin drops back below $60,000, miners could start to experience real financial stress.
Long-term holders are also looking more cautious.
Data shows wallets holding 10 to 10,000 BTC now control their smallest share of supply in nine months, suggesting this group has been trimming exposure rather than accumulating.
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