Flash Crash Erases Bitcoin’s Powell Rally as Derivatives Traders Brace for Volatility

Bitcoin Drops Sharply After Whale Dump Erases Post-Powell Gains

Bitcoin’s weekend rally was abruptly halted on Sunday after a large holder reportedly sold 24,000 BTC, triggering a flash crash that erased Friday’s gains following dovish remarks from Federal Reserve Chair Jerome Powell.

BTC fell over 2% in under 10 minutes, dropping from $114,666 to $112,546 by 07:40 UTC, and briefly dipped below $111,000 before rebounding to around $112,800, according to CoinDesk data.

Blockchain analytics firm Timechainindex.com attributed the crash to a whale offloading a significant portion of their holdings. “This entity liquidated its entire 24,000 BTC balance, sending it to Hyperunite. They transferred 12,000 BTC today alone and are still actively selling,” said researcher Sani on X. The whale reportedly still holds 152,874 BTC across various addresses, including 5,266 BTC in one active wallet.

The funds are believed to have originated from HTX approximately six years ago and had remained inactive until recently.

Fed Optimism Fades Quickly

The crash reversed nearly all of Friday’s rally, which had been sparked by Powell’s Jackson Hole speech. His comments supported the potential for rate cuts while minimizing long-term inflationary risks from Trump-era tariffs. The speech triggered a nearly 4% BTC surge from $112,500 to $116,900, alongside a rally in U.S. equities and a weakening dollar.

Over the weekend, market participants began pricing in a September rate cut, fueling optimism for new all-time highs in both bitcoin and ether. However, the sudden whale sell-off reminded traders of the market’s fragility, especially in low-liquidity conditions.

Options Market Reflects Caution

Despite Powell’s dovish tone, sentiment in the crypto options market remains cautious. Data from Amberdata shows that Deribit’s bitcoin options still signal risk aversion.

Specifically, 25-delta risk reversals—an indicator measuring the premium of puts over calls—remain negative through December. This suggests traders are continuing to pay more to hedge against downside risk than to speculate on upside, despite a supportive macro environment.

Put simply, BTC options traders are still bracing for volatility and potential downside, even as the spot market reacts to central bank guidance.