Bitcoin traders hit peak unrealized pain as ETFs start to turn positive

Bitcoin may be nearing a make-or-break point as short-term traders sit on the steepest unrealized losses of the current bull cycle.

Short-term Bitcoin (BTC) traders who have held BTC between one to three months have been sitting on losses ranging from 20% to 25% for over two weeks, marking the highest pain point of the current market cycle, according to CryptoQuant analyst Darkfrost.

“Once a large portion of them has capitulated, as we have seen in recent weeks, that is usually when the opportunity to accumulate becomes interesting,” he wrote in a Monday note.

This cohort will remain underwater until BTC trades back above its realized price of about $113,692, Darkfrost added.

Bitcoin onchain trader realized price and profit/loss margin. Source: CryptoQuantSome of the largest financial institutions remain optimistic about Bitcoin’s trajectory in 2026, despite the current correction.

On Monday, asset management giant Grayscale said that Bitcoin’s current drawdown points to a local bottom ahead of a recovery in 2026 — a development that will invalidate the four-year cycle theory, according to the company.

Related: Cathie Wood still bullish on $1.5M Bitcoin price target: Finance Redefined

Bitcoin ETF only accounted for up to 3% of selling pressure: ETF analyst

Despite previous concerns about the large-scale sales from spot Bitcoin exchange-traded fund (ETF) holders, these funds were only a fraction of the selling pressure behind Bitcoin’s price decline.

“I just read that Citi analysts say that for every $1 billion pulled from Bitcoin ETFs it equals roughly a 3.4% drop in Bitcoin’s price. Ok, so then by that logic, since the ETFs have taken in +$22.5b of inflows YTD BTC should be up 77% this year,” wrote Bloomberg ETF analyst Eric Balchunas, in a Monday X post.

“ETFs have been like 3% of the total selling tops.”

Source: Eric BalchunasRelated: Bank of America backs 1%–4% crypto allocation, opens door to Bitcoin ETFs

Meanwhile, Bitcoin ETFs have started to recover from the $3.48 billion of cumulative outflows recorded during November, marking their second-worst month on record.

The Bitcoin ETFs recorded $58 million worth of net positive inflows on Tuesday, staging their fifth consecutive day of positive inflows, according to Farside Investors data.

Bitcoin ETF Flow USD, million. Source: Farside InvestorsThose modest inflows could continue as Bitcoin trades back above the roughly $89,600 flow-weighted cost basis for ETF buyers, meaning the average holder is no longer sitting on paper losses.

Looking at the other US crypto funds, spot Ether (ETH) ETFs saw $9.9 million in outflows on Tuesday, while the Solana (SOL) ETFs recorded $13.5 million of net negative outflows, according to Farside Investors.

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