Bitcoin ETF Holders Underwater by 15%, Redemption Wave Looms

Bought at $90,200, now trading at $76,800. That's the harsh reality facing Bitcoin ETF investors who are sitting on paper losses that could trigger the next wave of selling pressure.

Spot Bitcoin ETF investors are now underwater by an average of 15%, according to estimates from Bianco Research and 10x Research. Since their U.S. debut two years ago, these investors have paid roughly $90,200 per BTC on average. With Bitcoin currently trading around $76,800, that translates to a paper loss of about $13,400 per coin.

Three Months of Exodus

The numbers tell a concerning story. January marked the third consecutive month of net outflows—the first such streak since the ETFs launched. The 11 spot Bitcoin ETFs have hemorrhaged $6.18 billion in net outflows during this period, according to SoSoValue data.

The bleeding started after the October 8 crash, when demand for ETFs cratered. Social media has widely blamed Binance, the leading cryptocurrency exchange by volume and open interest, for triggering the selloff.

Being underwater creates a dangerous dynamic. Short-term traders and speculators who bought hoping for quick profits may now rush for the exits, adding bearish pressure to an already fragile market.

Institutional Money vs. Retail Panic

Analysts previously told CoinDesk that institutional capital flowing into ETFs is meant for the long haul and tends to be "sticky"—meaning it doesn't flee at the first sign of trouble. This institutional backbone could prevent a full-blown capitulation.

But retail investors tell a different story. These are the players who bought into the narrative of easy gains and mainstream adoption. Now they're facing the uncomfortable reality that even ETF-wrapped Bitcoin carries the same volatility risks as the underlying asset.

If the bear market deepens, we could see the classic capitulation pattern: long-term holders finally throw in the towel, volumes explode, and prices find their true bottom. This dynamic often marks the peak bear phase, but it's also when the most damage gets done to investor confidence.

The Redemption Question

The $90,200 average entry price represents more than just a number—it's a psychological line in the sand. Every dollar Bitcoin falls below this level increases the pressure on ETF holders to cut their losses.

Unlike direct Bitcoin ownership, ETF investors can't just "HODL" and forget. They see their losses marked to market daily, creating constant pressure to act. The question isn't whether redemptions will come, but how severe they'll be.