Market Makers Accelerate Bitcoin's Plunge to $60,000
By John Nada·Feb 9, 2026·5 min read
Market makers significantly influenced Bitcoin's plunge to $60,000. Their actions created a self-reinforcing cycle of selling pressure, impacting the crypto market.
Bitcoin's recent crash to nearly $60,000 wasn't just a product of macroeconomic pressures; market makers played a significant role in amplifying this decline. According to CoinDesk, the cryptocurrency fell sharply from $77,000 early this month, erasing substantial market value and impacting various trading funds. This sharp decline has raised questions about the role of market dynamics in the cryptocurrency space, particularly in light of the growing influence of derivatives trading.
Observers had attributed the price drop to the capitulation of spot ETF holders and potential rumors regarding funds exiting their positions. However, the quieter influence of market makers, who ensure liquidity by continuously posting buy and sell orders, likely had a major impact on driving prices lower during this tumultuous period. Their presence in the market is crucial as they facilitate trading by providing the necessary liquidity that allows for smooth transactions without significant delays or drastic price shifts.
Market makers are typically positioned on the opposite side of trades, earning from the bid-ask spread without taking on directional risk. They manage their exposure to price volatility by hedging their positions, which can inadvertently escalate existing price movements. Between February 4 and February 7, as Bitcoin's price fell significantly, Markus Thielen, founder of 10x Research, noted that these market makers were “short gamma” in the $60,000 to $75,000 range. This situation left them exposed to price fluctuations, compelling them to sell Bitcoin in both spot and futures markets to maintain their hedges, thus injecting additional selling pressure.
Thielen explained the mechanics of this process: negative gamma means that options dealers must hedge in the same direction as the underlying asset's price movement. As Bitcoin dipped below $75,000, the need for market makers to sell increased, creating a self-reinforcing cycle of falling prices. Approximately $1.5 billion in negative options gamma between $75,000 and $60,000 critically contributed to Bitcoin's swift decline. This underscores the complex interplay between derivative markets and spot prices, illuminating how market makers can inadvertently amplify price movements.
This phenomenon mirrors dynamics seen in traditional financial markets, where market makers can amplify volatility through their hedging activities. In traditional finance, similar mechanisms have been observed where liquidity providers inadvertently contribute to sharp price movements during periods of high volatility. The report highlighted how this drop was not merely a reaction to external market forces but also an internal market mechanism exacerbating the situation. Traders may overlook the impact of market makers, focusing instead on macroeconomic factors or rumors, but the reality is that these entities play a pivotal role in the overall health and stability of the market.
Interestingly, market makers' hedging strategies aren't inherently bearish. For instance, in late 2023, they were short options above $36,000. As Bitcoin's price surpassed that threshold, these market makers were compelled to buy Bitcoin to rebalance their positions, resulting in a rapid price rally above $40,000. This illustrates how their actions can also lead to significant upward momentum under different circumstances. The duality of market makers' influence highlights the complexity of trading strategies and their potential to either exacerbate downturns or catalyze rallies, depending on market conditions.
The implications of this incident are profound for investors and market participants. Understanding how market makers operate and their influence on price movements is crucial. Their role is often understated, yet they are pivotal in shaping market dynamics, especially during periods of heightened volatility. As the cryptocurrency market matures, the interactions between spot prices and derivatives trading will become increasingly important to comprehend for anyone looking to navigate these turbulent waters effectively.
Moreover, the interplay between market makers and the options market suggests that traders need to be more vigilant about the implications of these activities. The recent crash highlights the need for a nuanced understanding of market forces and their potential to create both downturns and rallies in cryptocurrency markets. As Bitcoin's options market increasingly impacts its spot price, traders must consider how shifts in sentiment or liquidity can lead to dramatic price fluctuations, often dictated by the actions of market makers.
The recent decline in Bitcoin's price serves as a cautionary tale for investors. It emphasizes the importance of recognizing the multi-faceted nature of market influences, especially in an environment as volatile as cryptocurrency trading. As market participants become more aware of the role that market makers play, it may lead to a more informed trading strategy that takes into account not just the fundamental factors driving price but also the underlying market mechanics that can amplify those movements.
Additionally, the situation raises questions about the broader implications for the cryptocurrency market. As more traders engage in derivatives trading, the relationship between spot and options markets will likely continue to evolve. This could lead to new trading strategies and risk management practices as participants learn to navigate the complexities introduced by market makers and their hedging activities. The landscape of cryptocurrency trading is shifting, and understanding these dynamics will be essential for success in this rapidly changing environment.
As Bitcoin continues to capture the imaginations of investors and traders alike, the importance of liquidity and the role of market makers cannot be overstated. Their actions, often invisible to the average trader, can have outsized impacts on price movements and market sentiment. This highlights the need for a deeper comprehension of market structure and the various players involved in the trading ecosystem.