As Bitcoin retreats more than 20% from its all-time high, retail investors are facing a significant test. The average cost basis of these ETFs lies near $89,000, which represents the breakeven line for a large cohort of investors and serves as a critical technical level for the market reversal in April.
Individual investors who were enthusiastic about Bitcoin exchange-traded funds (ETFs) as cryptocurrencies moved toward the mainstream are now experiencing firsthand the dynamics of the digital asset hype cycle.
After tens of billions of dollars flowed into these easily tradable ETFs this year, pushing Bitcoin to new all-time highs, the token suddenly fell more than 20% from its recent peak. Although most ETF buyers remain in profit, their margin of safety is rapidly narrowing.
According to K33 Research, the average cost basis of U.S. spot Bitcoin ETFs — the blended entry price of all historical inflows — stands at approximately $89,613. This is about 11% lower than the current trading price of the digital token and effectively marks the breakeven point for the average ETF buyer.
Notably, this level coincides with a key technical zone from April, when Bitcoin reversed higher from a 2025 low after a prolonged period of selling pressure.
"It is quite interesting to see how well the April reversal aligns with the cost basis," said Vetle Lunde, head of research at K33 Research.
This suggests that: many ETF investors did not chase the market top. Instead, they bought during periods of market sell-offs, increasing their exposure when it seemed like the market bottom. But with Bitcoin now retreating again, investors may quickly shift their positioning if the cryptocurrency approaches that level once more.
Proponents argue that ETF buyers are focused on the long term, reacting less to short-term price fluctuations, and have so far acted as a stabilizing force, helping to temper Bitcoin's historically extreme volatility.
For new investors drawn to Bitcoin due to regulatory friendliness, the recent decline serves as a reality check: sharp price swings do not disappear simply because Wall Street has entered the scene.
Meanwhile, overall market sentiment has turned gloomy. Bitcoin fell more than 6% on Tuesday, dropping below the $100,000 mark to reach its lowest level since June. It is currently down 20% from last month’s record high, a drop that would indicate a bear market in more traditional asset classes. Ethereum and smaller altcoins have performed even worse. The plunge was driven by weak market participation and lingering fear from the historic liquidation shock in October, which wiped out billions of dollars in leveraged trades and drained long positions.
Data compiled by Bloomberg show that IBIT, the largest ETF tracking Bitcoin managed by BlackRock, has attracted over $27 billion in inflows so far this year, with its current asset size standing at approximately $85 billion.
Over the years, Bitcoin has gone through numerous boom-and-bust cycles and is known for its ability to rebound after repeated declines of more than 50%.
James Seyffart of Bloomberg Intelligence stated that investors putting money into this asset "should be aware" of this characteristic.
"This asset and these ETFs operate in a 'two steps forward, one step back' manner," he said. "This is an extremely volatile asset, and cryptocurrencies as a whole represent a highly volatile asset class. I cannot pretend to know whether this is just another 'one step back' moment or the beginning of a larger pullback."