Bitcoin Traders Experience Peak Unrealized Losses as ETFs Show Signs of Recovery

As the market dynamics shift, Bitcoin finds itself at a critical juncture. Short-term traders are facing significant unrealized losses, marking a crucial moment in this current bull cycle.

Key Takeaways

Short-term Bitcoin traders are experiencing unrealized losses of up to 25%.
A significant bounce back is anticipated when Bitcoin surpasses the realized price of about $113,692.
Major financial institutions are optimistic about Bitcoin’s future trajectory despite current corrections.
Bitcoin ETFs show early signs of recovery after recent outflows.

Bitcoin has been experiencing a challenging phase, with short-term traders holding on to Bitcoin (BTC) for one to three months now facing unrealized losses ranging from 20% to 25%. According to Darkfrost, an analyst from CryptoQuant, these losses have persisted for over two weeks, indicating the highest pain level seen in the current market cycle.

In a note issued on Monday, Darkfrost states that once a significant number of these traders capitulate, the potential for accumulation becomes more appealing. This group will remain in a challenging position until Bitcoin prices rise above the realized price, which is approximately $113,692.

Bitcoin onchain trader realized price and profit/loss margin. Source: CryptoQuant

Despite the current downturn, some major financial institutions remain optimistic about Bitcoin’s future. Grayscale, a leading asset management firm, noted that the current market dip signals a potential local bottom, suggesting that a recovery could unfold in 2026. This outlook posits a challenge to the theory of a four-year market cycle.

Bitcoin traders hit peak unrealized pain as ETFs start to turn positive

Carefully Analyzing Bitcoin ETFs and Market Dynamics

Minimal Selling Pressure from Bitcoin ETF Holders

Concerns had arisen regarding massive sales from spot Bitcoin exchange-traded fund (ETF) holders. However, recent findings indicate that these ETFs contributed only a minimal amount of the selling pressure affecting Bitcoin's price.

Bloomberg ETF analyst Eric Balchunas highlighted in a post that, according to Citi analysts, for every $1 billion withdrawn from Bitcoin ETFs, Bitcoin's price could drop by roughly 3.4%. Given that Bitcoin ETFs have seen over $22.5 billion in inflows to date this year, the implication is that Bitcoin should have experienced a price increase of about 77%.

Source: Eric Balchunas

In another encouraging development, Bitcoin ETFs are beginning to recover from the $3.48 billion in cumulative outflows recorded last November—their second-worst month ever. As per data from Farside Investors, these ETFs recorded a net positive inflow of $58 million on Tuesday, marking their fifth consecutive day of positive inflows.

Bitcoin ETF Flow USD, million. Source: Farside Investors

The ongoing modest inflows indicate that Bitcoin may continue to strengthen as prices rise above the flow-weighted cost basis of approximately $89,600 for ETF buyers, suggesting that the average holder is no longer facing losses on paper.

On the other hand, spot Ether ETFs experienced $9.9 million in outflows on Tuesday, while Solana ETFs faced a net outflow of $13.5 million, according to Farside Investors.

Broader Market Implications

The developments in the Bitcoin ETF sector could have significant implications for the broader crypto market. Investors are keenly watching these trends, especially as Bitcoin attempts to stabilize and rise from its current challenges. As always, market conditions can change rapidly, and traders should remain informed to make educated decisions in this dynamic landscape.