Banks, ETF Products, and the “Negative Gamma” Effect

[chainsniff]

Another explanation gaining traction comes from former BitMEX CEO Arthur Hayes, who argues that US banks may have played a central role in the sell-off.

Banks like Morgan Stanley issue structured notes tied to spot Bitcoin ETFs, offering clients conditional exposure to BTC’s upside. When Bitcoin breaks below certain price levels embedded in these products, banks must hedge their exposure by selling BTC or futures.

This creates a “negative gamma” effect: as prices fall, hedging activity forces even more selling. Instead of stabilizing markets, dealers become liquidity takers, accelerating downside moves. Once key levels were breached, the hedging feedback loop may have intensified Bitcoin’s decline.

[lingriiddd]

once margin calls start, the narrative doesn’t matter anymore — it’s just forced selling