Bitcoin’s Bear Market Takes a Toll on New Investors
Crypto Newcomers Face Heavy Losses as Market Retreats from Record Highs
The thrill of Bitcoin’s meteoric rise past $100,000 lured in a wave of new investors, but just weeks later, many are facing harsh reality as the cryptocurrency tumbles.
Following Donald Trump’s victory in the November U.S. presidential election, Bitcoin surged to an all-time high of $109,071 in January. Yet, in a rapid reversal, the largest cryptocurrency has now slumped nearly 25%, trading at around $80,000. The sharp decline comes amid a broader sell-off in global stocks, leaving many newcomers deep in the red - particularly those who bought in at the peak with borrowed funds.
New Investors Hit Hard
According to analytics firm Glassnode, the past three months have seen at least 20 million new Bitcoin addresses created, representing about 1.5% of all Bitcoin addresses ever recorded. However, data from crypto exchange Bitfinex shows that the "spent output profit ratio," which measures whether Bitcoin is being sold at a profit or a loss, has dipped to 0.95 - its lowest point in over a year. This signals that recent buyers are now cashing out at a loss for the first time since October.
"This suggests that recent buyers are locking in significant losses, reinforcing the exceptionally challenging conditions for newer investors," Bitfinex analysts explained.
Bitcoin’s rapid rise had been fueled by optimism over Trump's economic policies and risk appetite in the markets. But as concerns over U.S. tariff policy, economic stability, and a tech stock downturn mount, investors are fleeing risky assets, pulling Bitcoin down with them.
"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 Trump’s executive order to establish a strategic Bitcoin reserve, alongside a stockpile of other cryptocurrencies, provided only a brief boost before the market resumed its slide.
Leveraged Traders in Trouble
For traders using leverage, the pain is even more severe. According to Bitfinex, daily realized losses among leveraged Bitcoin traders have exceeded $800 million, with February 28 and March 4 marking some of the most brutal single-day losses.
Crypto investment products have also taken a hit, facing outflows for the fourth straight week, per data from CoinShares. Total assets under management in these products have now dropped by $4.75 billion to $142 billion - the lowest level since mid-November 2024, just after the U.S. election.
U.S. spot Bitcoin ETFs have not been spared either. On February 25, they recorded outflows of $1.1 billion - the largest daily withdrawal since their launch in January 2024, according to J.P. Morgan.
What’s Next for Bitcoin?
Historically, Bitcoin has bounced back from sell-offs, but this time, its fate may be tied to the broader financial markets. Investors are bracing for more turbulence, as implied Bitcoin volatility has spiked to 69% in the past 24 hours, while Ether’s implied volatility has surged from 65% to 90%, per data from Amberdata.
"The last 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 similar to what we saw in late 2018, which was nothing more than a short-term hiccup on the way to further highs."
For now, Bitcoin appears to be searching for support, with analysts pointing to the $73,500 level as a possible floor. But with market uncertainty running high, investors - especially newcomers - may need to buckle up for a bumpy ride ahead.
