A wave of new investors who eagerly entered the Bitcoin market at record-high prices are now grappling with significant losses as the cryptocurrency undergoes a sharp decline. The recent bear market, exacerbated by a global stock sell-off, has left many wondering if their optimism was misplaced.
Bitcoin, the world’s largest cryptocurrency, surged to an all-time high of $109,071 in January following Donald Trump’s victory in the U.S. presidential election. However, barely six weeks after his inauguration, the digital asset has plummeted to approximately $80,000—a decline of nearly 25% from its peak.
New Investors Caught in the Downturn
Many investors, particularly those who leveraged borrowed funds to capitalize on Bitcoin’s historic rally, are now feeling the strain. Data from crypto analytics firm Glassnode reveals that at least 20 million new Bitcoin addresses—roughly 1.5% of all Bitcoin addresses in existence—have been created in the past three months alone.
At the same time, the spent output profit ratio, a key metric that tracks the profitability of Bitcoin transactions, has dropped to 0.95. This marks its lowest level in over a year and the first negative reading since October, according to data from crypto exchange Bitfinex.
“This suggests that recent buyers are locking in significant losses, reinforcing the exceptionally challenging conditions for newer investors,” analysts at Bitfinex noted.
Broader Economic Concerns Weigh on Crypto
Bitcoin’s steep decline mirrors broader concerns about U.S. tariff policies, the health of the global economy, and a wider sell-off in the technology sector.
“I was surprised to see Bitcoin at $80,000, and it looks like the bloodletting hasn’t ended yet,” said Kevin Dede, an analyst at investment bank H.C. Wainwright.
Even President Trump’s executive order establishing a strategic Bitcoin reserve, alongside a stockpile of other digital assets, only provided a temporary boost to the market.
“This corrective sell-off has caught many by surprise,” said John Glover, chief investment officer of crypto lending platform Ledn. He suggested that Bitcoin may find support around the $73,500 level.
Heavy Losses for Leveraged Traders
Traders who took leveraged positions in Bitcoin have been particularly hard-hit. According to Bitfinex analysts, realized losses among this group have exceeded $800 million per day, with February 28 and March 4 marking some of the most significant single-day downturns.
Investment products tied to digital assets have also suffered outflows for the fourth consecutive week, according to data from CoinShares. The total assets under management in such products have fallen by approximately $4.75 billion, reaching $142 billion—the lowest level since mid-November 2024, following the U.S. election.
In a further sign of investor unease, U.S. spot Bitcoin exchange-traded funds saw outflows of roughly $1.1 billion on February 25, marking the largest single-day withdrawal since their introduction in January 2024, according to JPMorgan data.
Market Volatility Expected to Continue
Historically, sharp sell-offs in cryptocurrency markets have been followed by periods of relative stability. However, market analysts suggest that Bitcoin’s near-term trajectory remains tied to broader financial market trends.
Implied volatility for Bitcoin, as priced into derivatives, surged to 69% in the past 24 hours, while Ethereum’s implied volatility spiked from 65% to 90% since Monday, according to Amberdata. This indicates that investors are bracing for further price swings.
“The past two weeks have 100% been driven by the equity market tantrum,” said Jeff Dorman, chief investment officer at asset manager Arca. “This likely plays out similarly to what we saw in late 2018, which was nothing more than a short-term hiccup on the way to further highs.”
As Bitcoin’s rollercoaster ride continues, investors—particularly those new to the space—will be closely watching to see whether the market stabilizes or plunges further into turmoil.
