Bitcoin ETF Investors Face Losses as Heavy Withdrawals Push Prices Below Average Purchase Cost

Investors in U.S. spot Bitcoin exchange-traded funds (ETFs) are now, on average, holding their positions at a loss. New analysis reveals that Bitcoin's price has fallen below the average cost basis of these popular investment vehicles, following significant capital withdrawals over the past fortnight.

According to data compiled by Galaxy's Head of Research, Alex Thorn, the 11 approved U.S. spot Bitcoin ETFs now hold approximately 1.28 million BTC, with an average purchase price of around $87,830 per coin. With Bitcoin trading near $74,600 in early Monday sessions—a drop of roughly 11% over the weekend—the typical ETF investor is underwater.

"This means the average Bitcoin ETF purchase is underwater," Thorn stated, highlighting a sharp reversal from the strong inflows that characterized the latter part of last year. Data from Coinglass shows net redemptions of about $2.8 billion over the past two weeks, marking the second- and third-largest weekly outflows on record.

Despite the price pressure, Thorn noted a silver lining: institutional holders appear to be demonstrating resilience. Total assets under management for these ETFs have declined by about 31.5% from their October peak, a smaller drop than Bitcoin's nearly 40% price fall over the same period. Cumulative ETF inflows remain only 12% below their high, suggesting limited outright capitulation by long-term investors.

However, analysts warn the mood is shifting. "Weakening demand could deepen the downturn," cautioned Nick Ruck, Director at LVRG Research. He pointed to macroeconomic uncertainty, geopolitical strains, and a broad investor shift towards de-risking as key headwinds suppressing buying interest. "If demand doesn't return, Bitcoin risks sliding into a prolonged bear phase," Ruck added.

The coming weeks will be critical in assessing whether ETF flows stabilize, potentially offering a foundation for recovery, or if further outflows extend the sell-off.

In a related development, Morgan Stanley's recent filing to launch its own spot Bitcoin ETF is seen by some as a strategic play beyond immediate flows. Jeff Park, Chief Investment Officer at ProCap, suggests the move is less about capturing near-term market share and more about cementing the bank's long-term position in the digital asset ecosystem. "It offers reputational and institutional benefits that extend beyond short-term performance," Park explained, linking the filing to Morgan Stanley's broader push via its ETRADE brokerage arm to expand crypto access and partnerships.

Market Voices: A Split in Sentiment

David Chen, Portfolio Manager at Horizon Capital: "This is a healthy correction and a test of conviction. The core institutional narrative for Bitcoin hasn't changed. Short-term volatility is expected in a nascent asset class."

Marcus Reynolds, Independent Crypto Trader: "The ETF hype is clearly fading. These outflows show that the 'easy money' has been made, and now we're back to reality. Retail investors who bought the top are getting burned, and the so-called 'institutional adoption' story is looking shaky."

Sarah Lim, Fintech Analyst at Cedar Street Advisors: "The data shows long-term holders aren't panicking. The focus should be on the structural adoption, like Morgan Stanley's filing, not just weekly flow numbers. This is about building infrastructure for the next cycle."

Rebecca Shaw, Retail Investor: "It's incredibly frustrating. We were told ETFs would bring stability, but it feels like we're just getting more volatility and now losses. It makes you question the whole premise."