Crypto's Stress Test Hits Balance Sheets as Bitcoin, Ether Collapse

Bitcoin and Ether prices continued their downward trend on Wednesday as U.S. spot Bitcoin ETFs saw $545 million in outflows, exacerbating a broader sell-off in the crypto market. The price of Bitcoin approached $70,000, while the total market capitalization for cryptocurrencies fell to $2.5 trillion from $3 trillion year-to-date. Ether ETFs also recorded $79.5 million in outflows, highlighting the widespread pressure across the asset class.

Bitcoin ETF investors have largely held onto their positions, with only 6% of assets exiting the funds despite significant price declines. This resilience has surprised some analysts, who had expected higher redemption rates given the sharp drawdowns. The iShares Bitcoin ETF (IBIT), managed by BlackRock, saw its assets fall to $60 billion from a peak of $100 billion.

Corporate ether treasury firms, including BitMine Immersion Technologies and SharpLink Gaming, are facing massive paper losses as the price of Ether continues to slide below their average cost basis. BitMine's unrealized losses have exceeded $6.95 billion, while SharpLink's losses stand at $1.09 billion. These firms, which hold substantial ether reserves, are now struggling with declining market net asset values (MNAV), making it more challenging to raise new capital.

Why Did This Happen?

Bitcoin's ETFs have seen net outflows of $1.8 billion year-to-date, despite attracting $3.5 billion in inflows earlier this year. The recent outflows have pushed the total assets under management for Bitcoin ETFs below $100 billion for the first time since April 2025. Analysts attribute the sell-off to broader macroeconomic pressures, including increased risk-off sentiment and concerns over Federal Reserve policy.

The decline in Bitcoin's price has also triggered significant liquidations in the derivatives market, with $2.6 billion in liquidations recorded in a single day. Long positions bore the brunt of these losses, with investors losing $2.13 billion compared to $469 million in short positions.

How Did Markets React?

The ETF outflows have had a visible impact on the price of Bitcoin, which fell below $80,000 in recent weeks. The average cost basis for ETF investors is around $90,000, meaning that many holdings are now underwater. This has led to concerns about further selling pressure, as investors may choose to cash out to recoup their initial investments.

Ethereum ETFs have also seen outflows, with institutional investors withdrawing nearly $81 million in recent sessions. The cumulative inflows for Ethereum ETFs have dropped to $11.83 billion, while net assets under management stand at $10.9 billion. These trends highlight the fragility of institutional exposure in the crypto market.

What Are Analysts Watching Next?

Bitcoin ETF outflows are now a key focus for market participants, as large redemptions can amplify price declines. Some analysts believe that the average ETF investor will hold onto their positions, given the lack of alternative investment vehicles in the crypto space. However, if redemptions continue and demand remains weak, Bitcoin could face further downward pressure, potentially falling toward $65,000.

Corporate ether treasury strategies are also under scrutiny, as declining MNAV ratios could limit the ability of firms to raise capital. Only the best-capitalized companies are expected to survive this downturn, according to Pantera Capital. The market is watching to see whether these firms will continue to buy the dip or scale back their exposure.

Institutional adoption of crypto appears to be evolving, with some investors moving away from ETFs and toward direct on-chain trading. This shift could signal a new phase in crypto investing, where institutions take a more active role in managing their own digital asset exposure.