Bitcoin traders at peak unrealized losses as ETFs turn positive
Short-term Bitcoin traders holding BTC for one to three months are experiencing the largest unrealized losses of the current bull cycle, with paper losses of roughly 20–25% persisting for over two weeks, according to CryptoQuant analyst Darkfrost. He notes these holders remain underwater until Bitcoin trades above its realized price near $113,692, and that capitulation among this cohort often signals attractive accumulation opportunities. Major institutions remain cautiously optimistic about 2026 recoveries; Grayscale flagged the current drawdown as potentially a local bottom ahead of a 2026 rebound. ETF flows have been blamed by some for selling pressure, but Bloomberg ETF analyst Eric Balchunas and others say spot Bitcoin ETFs accounted for at most about 3% of recent selling. Bitcoin spot ETFs recorded a modest $58 million net inflow on Tuesday after $3.48 billion of cumulative outflows in November, marking five consecutive days of positive flows per Farside Investors. The ETFs’ average flow-weighted cost basis sits near $89,600, meaning ETF buyers are no longer broadly underwater if BTC holds above that level. Related US spot crypto funds saw small outflows: spot Ether ETFs netted $9.9 million outflows and Solana ETFs $13.5 million outflows on the same day. Key takeaways for traders: elevated short-term unrealized losses increase the risk of further short-term selling if capitulation continues, but modest ETF inflows and institutional commentary suggest potential support if BTC holds key cost-basis levels.
Neutral
The news presents mixed signals. Short-term BTC holders are at the deepest unrealized losses of the cycle (20–25%), which elevates short-term selling risk and could prolong downward pressure if capitulation accelerates. That is bearish for near-term trading. Counterbalancing this, ETF flows have begun to turn modestly positive (five consecutive days, $58m net inflow), and analysts estimate ETFs were responsible for only a small share (~3%) of recent selling—reducing concerns about large, sustained ETF-driven liquidation. Institutional commentary (e.g., Grayscale) signaling a potential local bottom and the ETF flow-weighted cost basis near $89,600 provide identifiable support levels traders can monitor. Historically, heavy unrealized losses among short-term cohorts have preceded both capitulation-driven drawdowns and subsequent accumulation phases; outcome depends on whether selling exhausts or momentum resumes. Practical implications: expect heightened volatility and possible continued downside in the short term if short-term holders keep selling; if BTC holds above ETF cost-basis levels and inflows continue, risk of stabilization and buy-the-dip setups increases for medium-term traders. Overall, the balance of selling pressure vs. marginal ETF inflows yields a neutral market impact.