IBIT's Record Volume and the $78,700 Trigger: A Flow-Driven Selloff

The immediate support level that halted the freefall was $60,000. This price became the critical floor after Bitcoin's steep decline, but the path down to that level was accelerated by mechanical selling.

The sell-off was fueled by dealer hedging tied to structured products using IBIT as the underlying asset. When banks issue derivatives like ELS or ETNs based on an ETF, they must delta-hedge their positions. As prices fall, they are forced to sell the underlying Bitcoin to protect against losses, creating a self-reinforcing cycle.

A specific trigger point likely activated this activity. According to a Morgan Stanley note cited at $78,700, this level represents a 75% knock-in threshold. When Bitcoin's price fell below this point, it likely forced dealers to sell their Bitcoin holdings to hedge their structured product books, exacerbating the decline toward the $60,000 support.

The Flow: Record Volume and Contrasting Inflows

The scale of institutional activity in IBIT was staggering. On Thursday, the fund recorded its busiest trading day ever, with more than 284 million shares traded and over $10 billion in notional value. This volume smashed the previous record by 169%, highlighting extreme market churn during a sharp sell-off.

That frenzy coincided with a severe price drop. IBIT's share price plunged 13% to under $35, extending its year-to-date loss to 27%. The fund's redemptions that day were substantial, totaling $175.33 million. Yet, a critical disconnect emerged: despite the heavy selling pressure and price decline, the fund saw about $60.03 million of net inflows.

This contrast signals institutional consolidation. While many Bitcoin ETFs saw money pulled, IBIT was the clear outlier absorbing fresh capital. The pattern points to large accounts using the volatility to rotate and consolidate their exposure into the deepest, most scalable vehicle, treating the reset as an entry point rather than an exit.

The Impact: Price Action and Market State

Bitcoin's price action over the past week was brutal. The asset fell nearly 18% over seven days, erasing a major part of its recent upside spike. This steep drop was not isolated; it triggered a broad market selloff, with Ethereum and Solana each falling close to 28% as investors moved into risk-off mode.

The price found a critical short-term floor at $60,000, which halted the freefall and has since acted as a support level. Following the plunge, Bitcoin staged a partial recovery, reclaiming the $70,000 mark on Friday, jumping by more than 7%. This bounce, however, occurred against a backdrop of severe structural pressure from cooling institutional demand.

Market sentiment has sharply reset. The pullback pushed the Crypto Fear & Greed Index into "Extreme Fear" territory. This signals a deep psychological shift, where traders are stepping back to reassess positioning amid heightened volatility. The combination of a major price drop, a fragile recovery, and extreme fear in the index points to a market in transition, where mechanical flows and hedging are now as influential as traditional sentiment.