Bitcoin is at a critical juncture, as short-term traders are experiencing the steepest unrealized losses of the current bull market cycle.
CryptoQuant analyst Darkfrost noted that short-term traders holding Bitcoin for 1 to 3 months have been in a 20% to 25% loss for over the past two weeks, marking the highest pain point of the current market cycle.
“He wrote in a report on Monday: ‘Once most of them capitulate, as we have seen in recent weeks, it is usually when accumulation opportunities start to become attractive.’”
Darkfrost added that this group will remain underwater until the price of Bitcoin returns above its realized price of approximately $113,692.
Despite the current pullback, some of the largest financial institutions remain optimistic about Bitcoin's trajectory in 2026.
On Monday, asset management giant Grayscale stated that Bitcoin's current retracement points to a local bottom before a recovery in 2026—according to the company, this development would invalidate the four-year cycle theory.
Despite previous concerns about large-scale sell-offs by holders of spot Bitcoin exchange-traded funds (ETFs), these funds account for only a small portion of the selling pressure behind Bitcoin's price decline.
“I just saw a Citigroup analyst say that every $1 billion withdrawn from Bitcoin ETFs roughly corresponds to a 3.4% drop in Bitcoin's price. Well, by that logic, since ETFs have seen inflows of over $22.5 billion year-to-date, Bitcoin should be up 77% this year,” Bloomberg ETF analyst Eric Balchunas wrote in a post on X on Monday.
Meanwhile, Bitcoin ETFs have begun to recover from the $3.48 billion cumulative outflow recorded in November, marking their second-worst month in history.
According to Farside Investors, Bitcoin ETFs recorded a net inflow of $58 million on Tuesday, achieving positive inflows for the fifth consecutive day.
As the price of Bitcoin returns above the ETF buyers' volume-weighted cost basis of approximately $89,600, these modest inflows may continue, indicating that the average holder is no longer at a paper loss.
Regarding other U.S. crypto funds, Farside Investors reported that the spot Ethereum ETF saw an outflow of $9.9 million on Tuesday, while the Solana ETF recorded a net outflow of $13.5 million.
Related: Bitcoin (BTC) surged to $93,000 after a pullback on Sunday, analysts focus on the $100,000 mark.
Original: “Bitcoin (BTC) Traders Face Peak Unrealized Losses, ETFs Begin to Turn Positive”
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