From crypto diehards to first-time ETF buyers, the people who would usually be buying Bitcoin right now can’t bring themselves to do it. And the data explains why.
Nearly 9 million Bitcoin — 45% of all tokens circulating in the market — is currently worth less than what its holders paid for it. Based on a recent low of around $62,800, the picture was even worse: almost 10 million coins, essentially half the supply, were underwater, according to data from researcher Glassnode. The largest cryptocurrency by market value has lingered around that level for weeks now, suggesting damage to buyer psychology is far reaching, not temporary.
This is the core problem confronting the market four months into a decline that has erased roughly half of Bitcoin’s value from its October peak above $126,000. The selloff has not been a single dramatic crash. It has been a slow, grinding bleed — below $100,000, then $90,000, then $80,000 — each threshold breached without the violent capitulation that historically clears the way for fresh buying.
Instead, the market has produced something arguably worse: a rolling wave of losses that has poisoned the willingness of the buyer base to re-engage. The evidence is visible across key indicators that crypto investors track. So many of them point in the same direction, and taken together, they describe a market in which the mechanisms of recovery have been systematically disabled.
Start with a basic momentum measure. Of the first 22 days in February, 19 have recorded net losses — meaning more holders sold below what they paid than above it, Glassnode data show. This is not a market pausing for breath. It is a market in which participants are locking in pain, day after day, either because they need the cash or because they no longer believe a recovery will arrive in time to save them. That capitulation has a compounding effect. Every sale at a loss removes a holder who might otherwise have been a future buyer. And every rally — however brief — gets met by a wall of sellers who bought higher and now see an exit rather than a floor. The result is a price ceiling that goes lower with each bounce: rallies get shorter, shallower and less convincing.
“It’s a heavily uncertain environment for Bitcoin where every small bounce is being used as a liquidity event,” said Roxanna Islam, head of sector and industry research at ETF shop TMX VettaFi. “A clear catalyst is needed before the market can build a more durable recovery, especially since this is the first major collapse since Bitcoin’s widespread adoption.”
Zoom out far enough and the diagnosis is clear. The infrastructure that powered Bitcoin to $126,000 — ETF inflows, accumulation by the largest holders, leveraged speculation, the narrative that Wall Street’s arrival had permanently de-risked the asset — is now running in reverse. ETFs are bleeding capital. The biggest wallets are selling. Leverage has been crushed. All of it’s converting every attempted recovery into a selling opportunity for burned holders desperate to get out at something closer to even.
Spot-Bitcoin ETFs have been seeing steady outflows, reaching nearly $3 billion so far this year, according to data compiled by Bloomberg. Many of the ETF buyers are sitting on deep losses: those who bought in did so at an average price of $83,956, meaning that the cohort is sitting on average paper losses of roughly 23%, according to Glassnode data. On average, it amounts to more than 600 Bitcoin offloaded every day over the past week.
“The selling makes sense,” said JonesTrading Chief Market Strategist Michael O’Rourke. “The advent of Bitcoin ETFs created a much wider investor base that helped fuel the run-up, but these investors are also less committed to the asset.”
Still, Bitcoin has famously gone through numerous busts only to recover to record highs again. Plenty in the space retain optimism. Brett Munster at Blockforce Capital points out that even though there have been outflows from Bitcoin ETFs, they’ve been modest when compared with the amount that had flown into the products in aggregate — before the most-recent selloff started. Total Bitcoin held by ETFs is down just 6% from the early October high — despite a price drawdown of 50%, he wrote in a note.
But the question facing the market is not whether Bitcoin can find a bottom. It is whether the buyer base, having been this thoroughly damaged, can pick itself up before the selling exhausts the last-remaining optimists. In the meantime, the market has a problem it didn’t have at $126,000: the people who were supposed to provide the next leg up are the same ones trying to get out.
Perhaps one of the most worrisome signals is the behavior of so-called whales, or holders who had accumulated large positions, oftentimes by having bought in at early when few on Main Street had even been aware of Bitcoin. Large holders have been net sellers of late, having shed more than 43,000 Bitcoin over the past week alone, Glassnode data show.
“The data shows persistent loss realization into rebounds. Rather than a single capitulation event, we’re seeing rallies met with supply from holders who accumulated at higher levels,” said Sean Rose at Glassnode. “That reflects distribution pressure, though it’s a behavioral signal rather than a forward-looking one.”