The average investor in Bitcoin exchange-traded funds (ETFs) is currently experiencing a significant setback, with a reported 20% paper loss. This situation raises concerns about potential capitulation selling if Bitcoin prices continue to decline, according to insights from a trader at Wintermute.
On Thursday, Bitcoin managed to stabilize above a crucial technical threshold after dipping below $66,000 earlier in the day. As of now, the cryptocurrency is trading around $67,000, reflecting a modest increase of approximately 1% over the past 24 hours.
In contrast, the CoinDesk 20 Index showed weaker performance, with major altcoins such as Ether (ETH), XRP, BNB, and Solana (SOL) either flat or slightly down. This trend suggests a cautious sentiment among investors in the altcoin market amid ongoing volatility.
Crypto stocks also saw slight gains, particularly notable among Bitcoin miners CleanSpark (CLSK) and Marathon Digital Holdings (MARA), which both rose by 6%. Meanwhile, broader market indices, including the S&P 500 and the Nasdaq 100, fell by 0.3% and 0.6%, respectively.
On the regulatory front, discussions are underway regarding a digital asset market structure bill. Recent talks hosted by the White House have brought together representatives from the crypto industry and banking sector, signaling some progress, although no definitive agreements have been reached yet.
However, the aftermath of the recent downturn in the crypto market is still evident. Blockfills, a Chicago-based crypto lender, is reportedly considering a sale following a $75 million loss in lending due to the price crash. The firm had also temporarily halted client deposits and withdrawals last week. While fears of significant fallout akin to the collapses of Celsius and FTX in 2022 linger, the current situation appears more contained.
Despite this, external pressures are causing hesitancy among investors. Concerns about increasing strain in credit markets have surfaced, particularly after Blue Owl, a private-equity firm, announced it would permanently limit redemptions in its $1.7 billion retail-focused private credit fund. The company’s stock dropped by 6%, while shares of other major private credit firms, including Apollo Global, Ares Capital, and Blackstone, fell over 5%.
Geopolitical tensions are also contributing to market unease, particularly regarding the potential for U.S. military action against Iran. This uncertainty has led to a rise in crude oil prices, which increased by 2.8% to over $66 per barrel, reaching its highest level since August.
In the crypto derivatives market, a defensive strategy is becoming apparent. Jake Ostrovskis, head of OTC at Wintermute, noted that many traders are opting for downside protection, effectively paying for insurance against further price drops while limiting their potential gains in the event of a market rally.
The average cost basis for U.S. Bitcoin ETF investors is currently around $84,000, indicating that a significant portion of these investors are facing losses. Despite this, total ETF holdings remain close to their peak in Bitcoin terms, suggesting that institutions are adjusting their exposure rather than exiting the market entirely.
In related news, Eric Trump has reiterated his belief in Bitcoin’s long-term potential, predicting it could eventually reach $1 million. Speaking at the World Liberty Financial forum, he highlighted Bitcoin’s historical average annual gain of about 70% over the past decade, challenging critics to identify a more successful asset class.
Bitcoin ETF investors are grappling with a 20% paper loss as the cryptocurrency stabilizes around $67,000. While some investors show caution amid market volatility, discussions on regulatory frameworks continue, and external economic pressures loom.