Bitcoin (BTC-USD) has reached a moment of decision as short-term traders are now grappling with the steepest unrealized losses of the entire current market cycle. Traders who bought Bitcoin between one and three months ago have been sitting on losses ranging from 20% to 25% for over two weeks, marking a moment of “peak pain.”
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Despite this retail capitulation, institutional demand is showing signs of recovery. Bitcoin ETFs have started turning positive, recording five consecutive days of net inflows, suggesting the market may be nearing a local bottom.
Peak Pain Could Signal Accumulation Opportunity
The steep unrealized losses are hitting the most active cohort of short-term traders. According to CryptoQuant analyst Darkfost, once a large portion of this group has capitulated, that is usually when the opportunity to accumulate becomes interesting. This has been seen in recent weeks.
This cohort will remain underwater until the Bitcoin price trades back above its realized price of about $113,692. However, some major financial institutions, including Grayscale, remain optimistic, suggesting the current drawdown points to a local bottom ahead of a recovery in 2026.
ETF Selling Pressure Was Only 3% Of Total
Despite previous market concern over large-scale sales from spot Bitcoin ETF holders, analysis confirms these funds were only a small fraction of the total selling pressure. According to Bloomberg ETF analyst Eric Balchunas, ETFs have been responsible for a maximum of only 3% of the total selling.
This data pushes back on the narrative that institutional outflows drove the recent price collapse. The analysis suggests that the vast majority of selling pressure came from other sources, including the short-term retail traders now sitting on deep unrealized losses.
Institutional Flow Turns Positive
The crucial development is the stabilization of institutional money flow. Bitcoin ETFs have started recovering from a difficult November, which marked their second-worst month on record.
The ETFs recorded $58 million worth of net positive inflows on Tuesday, marking the fifth consecutive day of positive inflows. This is significant because Bitcoin is now trading back above the $89,600 flow-weighted cost basis for ETF buyers, meaning the average institutional holder is no longer sitting on paper losses.
To sum up, short-term Bitcoin traders are now facing the steepest unrealized losses of the cycle. This is coupled with five consecutive days of Bitcoin ETF inflows, which strongly suggests the market is reaching a point of retail capitulation and institutional accumulation. The rebound in ETF flows helps confirm that the institutional selling pressure was minimal. This clears the path for a potential local bottom and recovery.
At the time of writing, Bitcoin is sitting at $92,918.01.
