Bitcoin trades below ETF cost basis as profitable supply falls to cycle lows

Bitcoin is trading below the average cost basis of U.S. spot exchange-traded fund [ETF] investors after recording its second- and third-largest weekly outflows on record. 

The shift coincides with a sharp contraction in the amount of BTC held in profit across the network.

According to Galaxy Research data, Bitcoin slipped below the aggregate ETF average purchase price following consecutive weeks of heavy redemptions. This pushed the average ETF holder into unrealized losses. 

Weekly outflows exceeded several billion dollars in late January, and figures are expected to rise further.

At the same time, on-chain data shows a broad deterioration in holder profitability. 

CryptoQuant’s Supply in Profit metric indicates that the number of bitcoins held at an unrealized gain has dropped to around 11–12 million BTC, down from roughly 19–20 million BTC in August. The decline marks one of the lowest readings of the current cycle.

Bitcoin ETF positioning flips underwater

The ETF cost-basis chart highlights a rare alignment between institutional positioning and on-chain stress. 

While earlier drawdowns left ETF buyers largely insulated, the latest pullback has pushed spot prices below the blended entry level of U.S. ETF inflows accumulated since launch.

Source: Glassnode

Bitcoin was trading near $74,000 at the time of the latest data. At the same time, the ETF average cost basis sits above $84,000, indicating that a significant share of institutional inflows are now underwater. 

Historically, periods when spot prices remain below ETF cost basis tend to suppress short-term demand, as inflows slow and redemptions become more sensitive to volatility.

Profitable supply compression deepens

The drop in supply held in profit suggests the drawdown is no longer confined to recent buyers or leveraged traders. Instead, profitability has been eroded across a wide range of holder cohorts.

Since October, every rebound attempt has failed to meaningfully rebuild profitable supply. Rallies into December and early January saw only modest recoveries before renewed downside pressure pushed more coins into unrealized loss. 

The latest move lower erased much of that progress, returning the metric toward cycle lows.

Source: CryptoQuant

This pattern points to a market transitioning away from profit-driven distribution toward loss-driven consolidation. 

As more holders slip underwater, selling pressure often slows after the initial decline. Also, price action becomes increasingly range-bound as participants hesitate to realize losses.

Market implications

The convergence of ETF losses and declining on-chain profitability helps explain the market’s recent behavior: muted rebounds, thinner liquidity, and heightened sensitivity to macro headlines. 

Rather than a leverage-led liquidation cascade, current price action reflects a structural reset in positioning.

Stabilization typically requires either a prolonged consolidation that allows cost bases to adjust, or renewed demand strong enough to lift prices back above key aggregate entry levels. Until then, upside momentum may remain constrained.

Final Thoughts

• Bitcoin’s drawdown is increasingly driven by profitability exhaustion, with both ETF investors and on-chain holders now largely underwater.
• A sustained recovery will likely depend on prices reclaiming the ETF cost basis or a period of consolidation that rebuilds profitable supply.