Bitcoin’s drop below $80,000 has pushed a significant portion of U.S. spot buyers of BTC exchange-traded funds (ETFs) to $7 billion in paper losses.
According to Crypto Slates The world’s largest digital asset fell to a low of $74,609 over the weekend, according to data, due to liquidity concerns and a risky tone in global markets. BTC has recovered to around $77,649 at the time of writing.
Alex Thorn, head of research at Galaxy Digital, noted that this price performance indicates that Bitcoin is trading below the average cost basis of US ETFs. Notably, spot Bitcoin ETF investors have average paper losses of around 15%, implying an average entry price of around $90,200 per Bitcoin.
That attitude can change behavior. Unlike self-managed buyers, who often tolerate sharp swings, ETF holders include advisors and allocators who rebalance according to predefined portfolio rules. When the average holder is down, rallies can turn into sell-to-even sales.
When prices fall again, some investors reduce their exposure to limit risk, especially as volatility increases and Bitcoin continues to keep pace with stocks.
Considering this, some industry experts argued that the significant pullback raises questions about whether the current buyback streak of the 12 ETF products will evolve from a tactical pause to a sustained market headwind.
Who is underwater, and how much?
The extent of the damage is becoming increasingly clear through on-chain and fund flow analyses.
Jim Bianco of Bianco Research highlighted that the 12 spot Bitcoin ETFs now hold approximately 1.29 million Bitcoin, worth more than $115 billion. These funds collectively own approximately 6.5% of all Bitcoin in circulation.
Combined with Strategy’s corporate treasury (formerly MicroStrategy), the ETF holdings represent 10% of all Bitcoin.
However, their entry points differ drastically. Strategy has been buying Bitcoin since 2020, for an average of $76,020 per purchase, giving it an unrealized gain of just $1.17 billion, compared to over $30 billion last October.
The ETF investors, on the other hand, came later and paid higher prices.
Bianco noted that the 12-spot Bitcoin ETFs have an average purchase price of about $90,200, about $13,000 (16%) above current prices.
Combined, the average purchase price of the ETFs is $85,360, indicating an average loss of about $8,000. This represents an unrealized loss of approximately $7 billion for these investors.
Essentially, this puts the average Bitcoin ETF buyer underwater.
Checkonchain’s James Check added a further nuance, saying that if one uses the cost basis of the inflows on the day they occurred, 62% of ETF inflows are now underwater.
US Bitcoin ETFs are money-consuming
Meanwhile, Bitcoin ETF holders’ losses have come alongside a clear shift in capital flows.
Across the twelve spot Bitcoin ETFs, net outflows between November 2025 and January 2026 were roughly $6.18 billion. This is the longest monthly outflow since these products launched in 2024.
It is striking that the repayments were interrupted by large daily withdrawals.
For context, SoSo Value’s data shows that the products recorded net redemptions totaling more than $1.3 billion in the last two trading days of January, alongside a nine-day outflow streak punctuated by modest inflows of $6.3 million.
When outflows occur in bursts, the market has less time to absorb supply, which can exacerbate intraday volatility. In episodes like this, Bitcoin often trades like a high-beta macro asset.
Essentially, the outflow represents a reversal of fortune for BTC ETFs, which have previously been a consistent source of demand for the leading cryptocurrency.
How much Bitcoin should the market swallow
The question for the market is the basic math of supply and demand: what happens to Bitcoin price discovery if the outflow trend continues?
If the ETF complex loses more than $6 billion every three months, the implied monthly rate is about $2 billion in net outflows.
At a hypothetical Bitcoin price of $75,000, this equates to approximately 27,000-28,000 BTC per month for other buyers to absorb.
As prices fall, the same outflow of dollars equates to more BTC, increasing the amount that must be absorbed elsewhere.
That figure seems even larger compared to Bitcoin’s post-halving issuance schedule. The 2024 halving reduced the block reward to 3,125 BTC, keeping the average new supply at about 450 BTC per day, or about 13,500 BTC per month.
Sustained ETF redemptions at the recent pace would therefore amount to a supply equivalent to approximately two months of new issuance per month.
Unless other sources of demand reemerge, this imbalance could weigh on sentiment and further depress the BTC price.
Why selling can drive more sales
The relationship between ETF flows and price action is statistically significant, and buyer mix helps explain this relationship.
A report K33 Research found last year that Bitcoin’s price remains closely linked to ETF flows, with an R-squared of 0.80 accounting for about 80% of the variance in 30-day BTC returns.
Bianco pointed to the average trade size as a reality check to determine who is actually driving the activity in these funds. While the average trade for the SPDR S&P 500 ETF Trust (SPY) is $111,300 and the SPDR Gold Shares (GLD) is $87,000, the average trade for Bitcoin ETFs is just $15,800.
According to him, that profile looks more like brokerage retail than long-term institutional positioning.
If, as Bianco noted, the marginal ETF holder is more retail-like, the flows can become more “price driven.”
In plain terms, when prices fall, more investors may decide to exit, and those exits show up as redemptions. Refunds then force sponsors to sell spot Bitcoin to meet withdrawals, which can push the price down again.
Considering this, Crypto Slates analysis suggests the $75,000 median price could provide support if buyers act.
If the Bitcoin price holds these areas and flows stabilize, ETFs could transition back from a supply source to a marginal buyer. This would reduce mechanical supply excess and potentially dampen market volatility.
However, if the outflows continue, BTC could face significant headwinds that could further depress the price. Alphractal CEO Joao Wedson noted that the next major support level for BTC in such scenarios is around $65,500.