How market makers likely accelerated bitcoin's crash to $60,000

Bitcoin plunged early this month to nearly $60,000, wiping out large chunks of value across the crypto market and vaporizing some trading funds. Most observers blamed macro forces, including the capitulation of spot ETF holders and rumors of funds blowing out positions, but a quieter force likely played a major role.

Market makers continuously post buy and sell orders in the order book, keeping liquidity strong so trades happen smoothly. They earn the bid-ask spread and hedge their exposure by buying and selling actual assets or related derivatives. At times, those hedging activities can accelerate an ongoing price move.

Between Feb. 4 and Feb. 7, as bitcoin fell from $77,000 to nearly $60,000, options market makers were "short gamma" between $60,000 and $75,000, leaving them vulnerable to volatility. As bitcoin dropped below $75,000, dealers sold BTC in the spot or futures markets to rebalance and remain price-neutral, injecting extra selling pressure.

bitcoin, market makers, options, short gamma, spot etf, futures, order book, liquidity, bid ask, selling pressure