Bitcoin & Ethereum Drop, ETFs Face Losses Amid Market Volatility

TLDR:

• Bitcoin and Ethereum fall below key technical levels, triggering $1.7B in liquidations. 
• U.S. Treasury confirms it cannot “bail out” Bitcoin or direct banks to increase holdings. 
• Spot ETFs face unrealized losses, but most investor positions remain largely intact. 
• Crypto funding continues selectively with TRM Labs, Flying Tulip, and Prometheum rounds.

Recent analysis covers major shifts in digital assets, including sharp price drops, regulatory actions, and institutional responses affecting market flows and positioning.

Crypto Market Downturn and Institutional Exposure

Bitcoin fell below $65,000, while Ethereum dropped under $1,900, triggering $1.7 billion in liquidations within 24 hours. Most liquidations came from long positions, as leveraged traders exited rapidly across major exchanges.

The market broke key technical levels, with Bitcoin falling under the 50-week moving average. Analysts used historical retracements to estimate downside, with targets ranging from $35,200 to $45,000.

Alex Thorn from Galaxy Digital noted that past cycles showed drops below 50-week moving averages often tested the 200-week level near $58,000.

Meanwhile, the cost basis for many institutional investors remained above current prices.
Strategy Inc.’s average holding cost is around $76,000 per Bitcoin, while JPMorgan estimates mining costs at $87,000.

Spot Bitcoin ETFs are also under pressure, with average entry costs near $84,100 per coin.
Despite a 25% unrealized loss, only a small portion of ETF assets has been withdrawn.

Overall, the market shows lower liquidity, technical weakness, and elevated institutional stress.

ETF inflows slowed, and macro-hedging appeal has reduced, reflecting cautious sentiment.

Regulation, Policy Signals, and Capital Movements

Seized Bitcoin has grown in value from $500 million to over $15 billion, reflecting market gains despite volatility. U.S. Treasury Secretary Scott Bessent clarified that seized Bitcoin will be retained, but the government cannot “bail out” prices.  

Regulatory attention is shifting to crypto infrastructure, focusing on exchanges, stablecoin corridors, and liquidity hubs.

The Treasury investigates potential sanction evasion, particularly by platforms linked to Iran’s $8–10 billion annual crypto activity.

Meanwhile, the White House hosted discussions with Coinbase, banking groups, and industry representatives on stablecoin rewards. The dialogue explored whether third-party platforms can provide regulated yields to users.

At the same time, state-level enforcement increased, with New York, Nevada, and Connecticut issuing warnings or restraining orders. This divergence reflects the evolving balance between federal guidance and state-level actions.

Capital formation continues cautiously. TRM Labs raised $70 million in Series C funding, while Flying Tulip secured $75.5 million. Prometheum and Penguin Securities also completed rounds, albeit at more conservative valuations.

Despite market stress, selective funding demonstrates ongoing investor interest in blockchain and crypto infrastructure projects. Family offices largely remain sidelined, with 89% holding no crypto exposure, while AI investments show higher interest.

BlackRock’s Bitcoin spot ETF IBIT retains most assets despite AUM retreat from $100 billion to $60 billion. Overall, institutional positioning reflects cautious engagement, regulatory attention, and selective capital deployment.

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