Despite Bitcoin ETF (IBIT) options trading reaching a record high, the fund itself crashed by 13%. In times like this, the market saying “buy on rumors, sell on facts” comes to mind, but this case is not that simple. That’s because market participants are completely split in their views.

First, let’s sort out the numbers. During Thursday’s sharp selloff, IBIT options trading surged to a record 2.33 million contracts, and the total premium rose to an all-time high of $900 million. This is a scale comparable to the market capitalization of more than 70 cryptocurrencies. Since put options outnumbered calls, it clearly suggests that a more defensive posture against downside risk had strengthened.

Analyst Mr. Parker’s claim is shocking. In his view, this record-breaking trading activity was caused by the failure of a large hedge fund (or multiple funds) that had concentrated nearly 100% of its capital in IBIT. After the October decline, this fund bought large quantities of cheap out-of-the-money call options, then used borrowed funds to double down on its bets. But as IBIT kept falling, it received margin calls from brokers. Due to insufficient collateral, the fund was forced into a fire sale—dumping large amounts of IBIT shares into the market—and in the frantic process of buying back expiring calls, the premium reached a record high. Shreyas Chari, Trading Director at Monarq Asset Management, has also made remarks supporting this theory.

However, options specialist Tony Stewart (founder of Pelion Capital) disagrees. In his view, the “painful” close was indeed painful, but most of the $900 million premium was made up of small trades, which is a standard level for a chaotic trading day. In other words, it was simply noisy confusion caused by widespread panic across the market, and it can’t all be attributed to the collapse of a single fund. He says, “This theory has not been conclusively determined from an options perspective.”

Whichever interpretation is correct, what this episode highlights is the fact that IBIT options have grown to the point where they now have a real, substantial impact on the market. Until now, to gauge the moves of institutional investors, traders have closely tracked capital inflows into IBIT. Going forward, the same kind of close attention may be needed for options trading activity as well. It seems we’ve entered an era where the market psychology of “buy on rumors, sell on facts” can function on such a large scale.