Bitcoin The price drop has left investors in the token’s spot exchange-traded funds (ETFs) with losses of 15% on average, setting the stage for potential panic selling if the cryptocurrency market does not stabilize.
Since its debut in the United States two years ago, investors have paid an average of about $90,200 per BTC, according to estimates from Bianco Research and 10x Research. With the largest cryptocurrency now trading around $76,800, that leaves them with a paper loss of around $13,400 per BTC.
Being underwater could trigger ETF redemptions, particularly by short-term traders and speculators who bought in the hope of continued, quick gains. These potential refunds could increase bearish pressures in the market.
Demand for ETFs has plummeted since the October 8 crash, which social media widely blames on Binance, the top cryptocurrency exchange by volume and open interest.
January already marked a third consecutive month of net outflows, the first consecutive quarter since its inception. The 11 bitcoin spot ETFs have recorded a net outflow of $6.18 billion in the period, according to data source SoSoValue.
A deepening bear market could potentially spur large-scale capitulation: long-term holders give up, liquidate, and volumes soar. This dynamic often marks maximum bearish phases.
That said, analysts have previously told CoinDesk that the institutional capital flowing into ETFs is intended for the long term and is “sticky,” meaning a full-blown capitulation is unlikely.
