Bitcoin’s drop below $80,000 has left a large portion of US spot BTC exchange-traded fund (ETF) buyers with a paper loss of $7 billion.
According to crypto slate The world’s largest digital asset fell to $74,609 over the weekend amid liquidity concerns and a risk-off trend in global markets, data showed. BTC has recovered to around $77,649 at the time of writing.
Alex Thorne, head of research at Galaxy Digital, said this price performance shows that Bitcoin is trading below the average cost basis of US ETFs. Notably, spot Bitcoin ETF investors have an average paper loss of around 15%, which means the average entry price per Bitcoin is around $90,200.
The behavior may change depending on the settings. Unlike self-custodial buyers, who often tolerate wild fluctuations, ETF holders include advisors and allocators who rebalance their portfolios according to predefined rules. If the average holder falls, the rally can turn into a “sell-to-even” sell.
If prices fall again, some investors will reduce their exposure to reduce risk, especially if volatility increases and Bitcoin continues to move in line with stocks.
Considering this, some industry experts argued that the significant drawdown has raised bets on whether the current streak of redemptions by 12 ETF products will develop from a tactical pause into a sustained market headwind.
Who is underwater and how long?
The extent of the damage is becoming clearer through on-chain and financial flow analysis.
Jim Bianco of Bianco Research highlighted that 12 Spot Bitcoin ETFs currently hold approximately 1.29 million Bitcoins, valued at over $115 billion. Together, these funds hold approximately 6.5% of all Bitcoin in circulation.
Combined with Strategy’s (formerly MicroStrategy) corporate finance, the ETF’s holdings are equivalent to 10% of all Bitcoin.
However, their entry points are very different. The strategy has been buying Bitcoin since 2020, with an average of $76,020 per purchase, resulting in just $1.17 billion in unrealized gains, down from more than $30 billion in October last year.
In contrast, ETF investors arrived later and paid higher prices.
Bianco noted that the average purchase price for the 12 Spot Bitcoin ETFs was about $90,200, about $13,000 (16%) above the current price.
Combined, the average purchase price of the ETF is $85,360, resulting in an average loss of about $8,000. This means approximately $7 billion in unrealized losses for these investors.
Essentially, this leaves the average Bitcoin ETF buyer in a bind.
James Check of Checkonchain added further nuance, saying that 62% of ETF inflows are currently underwater, assuming a cost basis on the day the inflows occurred.
US Bitcoin ETFs are losing money
Meanwhile, significant changes in capital flows have also led to losses for Bitcoin ETF holders.
Across the 12 Bitcoin Spot ETFs, net outflows from November 2025 to January 2026 were approximately $6.18 billion. This was the longest consecutive monthly outflow since these products were launched in 2024.
Notably, redemptions are punctuated by large daily drawdowns.
For context, SoSo Value data shows each product recorded net redemptions totaling more than $1.3 billion in the last two business days of January, marking a nine-day streak of outflows punctuated by modest inflows of $6.3 million.
If outflows occur all at once, the market will have less time to absorb supply, potentially exacerbating intraday volatility. In episodes like this, Bitcoin often trades like a high-beta macro asset.
Essentially, this outflow represents a reversal of fortunes for BTC ETFs, which have until now been a consistent source of demand for the leading cryptocurrency.
How much Bitcoin does the market need to swallow?
The question going forward for the market is basic supply and demand calculations. What will happen to Bitcoin pricing if the outflow trend continues?
If the ETF complex continued to have outflows of more than $6 billion every three months, the implied monthly pace would be about $2 billion in net outflows.
Assuming a hypothetical Bitcoin price of $75,000, this equates to approximately 27,000-28,000 BTC per month that must be absorbed by other buyers.
As prices fall, the same dollar outflow is equivalent to more BTC, thereby increasing the amount that has to be absorbed elsewhere.
This number looks even higher when compared to Bitcoin’s issuance schedule after the halving. With the halving in 2024, the block reward will decrease to 3.125 BTC and the average new supply will be about 450 BTC per day, or about 13,500 BTC per month.
Therefore, if ETF redemptions continue at the recent pace, the supply would be equivalent to about two months of new issuance each month.
Unless other sources of demand emerge again, this imbalance could weigh on sentiment and push BTC prices further lower.
Why sales drive more sales
The relationship between ETF flows and price changes is statistically significant, and buyer composition helps explain this relationship.
A K33 Research report last year found that Bitcoin prices continue to be closely related to ETF flows, with an R-squared of 0.80 and accounting for approximately 80% of the variance in 30-day BTC returns.
Bianco pointed to average deal size as a reality check on who is actually driving the activity in these funds. The average trade size of the SPDR S&P 500 ETF Trust (SPY) is $111,300 and the average trade size of SPDR Gold Shares (GLD) is $87,000, while the average trade size of the Bitcoin ETF is only $15,800.
He said the profile is more like a securities retailer than a long-term institutional investor.
As Bianco pointed out, if marginal ETF holders are more retail-oriented, flows can become more “price-driven.”
In layman’s terms, when prices fall, more investors may decide to exit, and that exit shows up as a redemption. Redemptions could then force sponsors to sell spot Bitcoin to accommodate cash withdrawals, causing the price to fall again.
Considering this, crypto slate Our analysis suggests that mid-$75,000 could provide support if buyers intervene.
If Bitcoin prices hold in these areas and flows stabilize, the ETF could return to being a source of marginal buyers. This could reduce mechanical supply overhangs and dampen market volatility.
However, if capital outflows continue, BTC could face significant headwinds and the price could fall further. Alpharactal CEO Joanne Wesson pointed out that BTC’s next major support level in such a scenario is around $65,500.
(Tag translation) Bitcoin
