- Bitcoin fell roughly 55% from its October 2025 peak, a milder decline than the more than 75% drop from nearly $69,000 in November 2021 to below $16,000 a year later, and shallower than the 80% or greater drawdowns of earlier cycles. It trades at $84,120.99, back near a $2 trillion market capitalization.
- Bitwise head of research Ryan Rasmussen attributes the change partly to spot ETFs launched in January 2024. A professional investor might hold around 2% of a portfolio in bitcoin where crypto-native retail holders can have 20% or 30%, so a 50% decline costs the professional roughly 1% of the portfolio.
- Rebalancing works symmetrically. An adviser targeting 2% buys after steep declines to restore the weight and sells when a rally pushes the position to 5%. Mark Connors of Risk Dimensions expects smaller drawdowns alongside moderating returns and smaller blow-off tops.
- Schwab director of digital asset research Jim Ferraioli disputes the ETF explanation, pointing instead to size: at $2 trillion, bitcoin requires vastly more capital to double than when it was worth billions.
What Happened?
Ferraioli argues bitcoin remains largely a retail asset and that ETF ownership should not be equated with institutional ownership, since individuals buy the funds too. He notes the average cost basis for ETF investors sat near $83,000 for much of the year while a measure tracking active spot investors moved from roughly $78,000 toward the mid-$70,000s as those buyers accumulated at lower prices. On supply, of roughly 20 million bitcoin in circulation he estimates four to five million may be lost and six to seven million are liquid, leaving a large base of holders who have survived multiple crashes. Rasmussen said professional engagement with Bitwise stayed high through this downturn, unlike 2022 when interest fell off a cliff, though adoption is slow: Bitwise typically holds about eight meetings with a financial adviser before an allocation, a process taking close to two years.
Why It Matters?
The cost basis figures undercut the story the article leads with. If institutional ETF money were stabilising the market, ETF holders would be the ones who bought the decline. They are not. Their average entry sits near $83,000, above where bitcoin trades now, meaning that cohort is underwater, while crypto-native spot buyers were the ones accumulating down into the mid-$70,000s. The floor during this drawdown was provided by the investors the institutional narrative treats as the unstable element. That is worth knowing before accepting that professional ownership has made the asset safer. Ferraioli size explanation is also the more parsimonious one, and it does not depend on who owns the asset. Doubling a $2 trillion asset requires roughly $2 trillion of new capital, which is arithmetic rather than market structure, and it means moderating returns were inevitable regardless of the ETFs. For allocators the symmetry is the point to internalise. The same rebalancing discipline that limits losses removes the explosive upside that justified holding a volatile asset in small size in the first place. Anyone owning bitcoin as an asymmetric bet should recognise that the asymmetry is being engineered out, and that a 2% position in an asset with equity-like returns and higher volatility is a different proposition from a 2% position in a lottery ticket. The supply picture cuts both ways: six to seven million liquid coins out of 20 million means a thin effective float, which amplifies moves in both directions and sits uneasily with the idea that volatility is structurally lower.
What Next?
Watch whether ETF cost basis moves below spot, since a cohort in profit behaves very differently from one underwater, and this is the cleanest available measure of whether institutional money is genuinely providing support. The adviser adoption pipeline is the slow variable, with eight meetings and nearly two years per allocation, so the institutionalisation thesis has years left to run rather than being complete. Track drawdown depth in the next decline against this cycle 55%, as a further reduction would confirm the structural change while a return toward 70% would suggest this cycle was simply milder. Rebalancing flows are most visible at quarter ends, so watch for selling pressure after sharp rallies. The most informative test will be the next major rally: if it fails to produce the multiples of previous cycles, Connors and Ferraioli will have been right that the trade-off is real and both tails have been clipped.
Affected Tickers and Coins: BTC, SCHW, BLK, COIN
Source: CoinDesk
