Bitcoin ETF investors facing paper losses could decide to cut their positions.

Spot Bitcoin ETF investors are now sitting on significant paper losses, raising the potential for large redemptions if the market fails to stabilize.

Bitcoin’s BTC $76,366.25 price drop has left investors in U.S.-listed spot ETFs holding average losses of roughly 15%, setting the stage for possible panic selling. According to estimates from Bianco Research and 10x Research, these investors bought bitcoin at an average price of around $90,200. With BTC now trading near $76,800, that translates to a paper loss of about $13,400 per coin.

Being underwater could prompt redemptions, particularly from short-term traders and speculators who entered the market hoping for quick gains. Such selling could amplify bearish pressures across crypto markets.

Demand for Bitcoin ETFs has already cratered since the October 8 crash, widely attributed on social media to Binance, the largest cryptocurrency exchange by volume and open interest. January marked a third consecutive month of net outflows—the first three-month run of this kind since the ETFs’ U.S. debut. Over this period, the 11 spot Bitcoin ETFs collectively saw a net outflow of $6.18 billion, according to SoSoValue data.

If the bear market deepens, it could trigger a full-scale capitulation: long-term holders liquidating positions and trading volumes spiking, a dynamic often seen at the peak of bear phases.

However, analysts have told CoinDesk that institutional capital flowing into ETFs is typically “sticky,” intended for the long term. This suggests that while redemptions may rise, a full-blown capitulation is unlikely.

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