Bitcoin (BTC) has plunged more than 40 percent over the past month, at one point falling to around $60,000. Hong Kong hedge funds and ETF-linked financial products in the United States are being singled out as key drivers of the drop.

Cointelegraph reported on Feb. 7 local time that bitcoin has fallen more than 40 percent over the past month. On some exchanges it slipped to as low as $59,930 last Friday, marking a year low. That is down more than 50 percent from the record high of $126,200 set in October 2025.

Market analysts point to high-risk leveraged trades by Hong Kong hedge funds and hedging sales of ETF-based structured products linked to U.S. banks as factors behind the sharp fall. They also raise concerns that if bitcoin drops below $60,000, additional selling pressure could emerge as miners approach their break-even point.

The first factor cited is “Asia-driven leverage liquidations.” Some Hong Kong hedge funds made large investments in options linked to IBIT, BlackRock’s spot bitcoin ETF, betting on a rise in bitcoin. They used a strategy of borrowing low-interest Japanese yen, converting it into other currencies and deploying it into risk assets such as cryptocurrencies. As bitcoin’s uptrend stalled and yen borrowing costs rose, leveraged positions deteriorated sharply, analysts say. Forced selling then occurred as lenders demanded additional collateral, accelerating the price decline.

Critics also say “structural selling pressure in the derivatives market” amplified the fall. Former BitMEX chief executive Arthur Hayes said some global banks including Morgan Stanley may have sold bitcoin or related assets to hedge exposure to structured products linked to spot bitcoin ETFs. The products are structured to bet on bitcoin price moves, and once certain price ranges are reached, selling is automatically triggered for delta hedging. This process created “negative gamma,” he said, producing a vicious cycle in which selling pressure grows as prices fall.

“Miners’ moves” also fuelled the decline. As demand for artificial intelligence (AI) data centres has surged, some miners have scaled back mining and shifted into data centre businesses, with analysts saying hashrate has fallen 10 to 40 percent. In December 2025, Riot Platforms sold about $161 million worth of bitcoin alongside a shift in its data centre strategy, and more recently IREN announced plans to pivot to AI data centres.

Mining profitability indicators are also sending warning signals. The Hash Ribbons indicator shows the 30-day average hashrate falling below the 60-day average, increasing pressure on miners’ earnings. Average power costs per bitcoin are estimated at about $58,160, while net production costs are put at about $72,700. If bitcoin stays below $60,000 for an extended period, miners’ financial burden is likely to grow further.

On-chain data also points to weakening investor sentiment. The supply share held by mid-sized and large wallets holding 10 to 10,000 BTC has dropped to the lowest level in nine months. It is interpreted as a sign that even long-term holders are selling.

Market participants say the decline reflects the combined impact of leverage liquidations, derivatives structures and structural changes in the mining industry, rather than a single negative catalyst. They forecast volatility could persist for the time being.