Bitcoin has recently experienced a substantial price decline, slipping below the $70,000 threshold after a drawdown approaching 40%. Despite this sharp decrease, investors holding spot Bitcoin Exchange-Traded Funds (ETFs) have predominantly maintained their exposure, demonstrating a level of conviction that many market observers did not anticipate.
Eric Balchunas, a Bloomberg ETF analyst, highlighted on the social platform X that approximately 94% of assets within spot Bitcoin ETFs remain invested even after this significant price correction. This observation suggests that the investors participating through these ETFs are largely foregoing immediate liquidation in response to market turbulence.
Adding further context, Jim Bianco from Bianco Research noted that the typical Bitcoin ETF investor is currently facing an average unrealized loss of around 24%. This equates to nearly $11 billion held underwater across these funds. Nonetheless, the persistence of investments indicates that current market movements exemplify a phase of typical volatility rather than signaling any fundamental disruption in ETF demand.
Data compiled by SoSoValue reflects that as of February 4, spot Bitcoin ETFs have experienced net outflows totaling $544.9 million. Spot Ethereum ETFs also registered outflows, but to a lesser degree, with $79.5 million departing. Contrasting these trends, spot XRP ETFs registered a modest net inflow of $4.8 million during the same period.
Crypto analyst Ali Martinez observes that for the first time in 18 months, Bitcoin’s market price has fallen below the average cost basis of spot ETF investors, estimated near $82,600. Bitcoin’s trading value around $77,000 places a significant proportion of ETF holders in an underwater position.
Historical patterns suggest that extended periods of trading below the aggregate cost basis often correspond with increased selling pressure. Martinez points to recent activity illustrating this trend: approximately 17,400 Bitcoins exited ETFs during the week beginning January 19, followed by an additional 9,540 Bitcoins the subsequent week.
Given these dynamics, Martinez advises caution, suggesting that recent upward price movements might be temporary corrections rather than the onset of a sustained upward trend, particularly in the absence of renewed ETF inflows. Should outflows continue, he identifies the 200-week moving average, located near $57,000, as a critical macro-level support point.
The overarching analysis of ETF flow data implies a heightened risk of further downside movement, underscoring the need for investors to exercise patience during this volatile period.
Key Points:
- Despite a nearly 40% decline, 94% of spot Bitcoin ETF assets remain invested, indicating holder resilience.
- The average Bitcoin ETF investor currently holds an unrealized loss of about 24%, totaling nearly $11 billion.
- Net outflows from spot Bitcoin and Ethereum ETFs continued into early February, while XRP ETFs saw marginal inflows.
- Sustained trading below the average ETF cost basis historically signals increased selling pressure, observable in recent weeks.
Risks and Uncertainties:
- If net outflows from spot Bitcoin ETFs persist, the price could approach the 200-week moving average near $57,000, representing potential further downside risk.
- Recent price rebounds might be temporary corrections rather than indicators of renewed upward momentum without fresh ETF inflows.
- Underwater positions among ETF holders create latent selling pressure that could materialize if market conditions deteriorate.
- Market volatility continues to complicate near-term price stability and may affect investor sentiment going forward.