Bitcoin halves, altcoins crash, retail investors who believed in the "Trump rally" are "paying the price"

After the Trump administration publicly promised to create a crypto capital and Wall Street compliance products quickly expanded, retail investors betting on the “Trump rally” are suffering heavy losses, cryptocurrency asset prices have fallen rapidly, and the volatility of the assets themselves has not decreased due to compliance.

As of press time, Bitcoin is quoted at $61,000, down more than 50% from its peak, erasing all gains accumulated before and after Trump’s return to the White House. Other altcoins’ market caps have fallen 51% from their October 2022 highs (considering token inflation that artificially inflated market cap, the actual price decline is even greater). Over the past week, the crypto market has lost at least $700 billion in market value.

(BTC price has dropped 51.78% from its high, chart source: TradingView)

(Altcoin market cap has fallen 50.88% from its high, chart source: TradingView)

Capital outflows occurred simultaneously. According to Bloomberg data, over $740 million flowed out of more than 140 crypto-themed ETFs in a single day on Wednesday, with nearly $4 billion net outflow over the past three months. Glassnode reports that the average cost basis for U.S. spot Bitcoin ETF holders is about $84,100, meaning many investors are currently at a paper loss at current prices.

Market participants emphasize that “pro-crypto” policies do not necessarily mean a price bottom. Nate Geraci, President of NovaDius Wealth Management, said that government support for crypto “won’t magically eliminate downward volatility.” Peter Atwater, founder of Financial Insyghts, pointed out that Washington often embraces deregulation when market sentiment is at its peak, and sharp declines afterward are not surprising.

“Trump rally” premium recedes, compliant products fail to “protect” volatility

The contrast in this pullback is that retail investors are not only facing risks directly through exchanges but are also entering the market via “Wall Street-approved” fund products. Under the White House’s pro-digital asset directives, regulators have approved many exchange-traded products, and asset managers have quickly launched various ETFs covering mainstream tokens and higher-risk tokens, including themed bets, speculative strategies, and yield packaging.

However, institutional endorsement mainly provides tradability and compliance channels, but does not change the high volatility inherent in the assets themselves. As the market reverses, the speculative premium supported by optimistic policy sentiment is being squeezed out, with retail investors bearing the main re-pricing costs.

As of press time, Bitcoin has fallen over 50% from its peak and hovers around $61,000. Meanwhile, according to TradingView data, the market cap of altcoins has dropped 51% from October highs, and considering token inflation, the actual price decline is even larger.

On a macro level, the overall crypto market cap has shrunk by at least $700 billion over the past week. Bloomberg notes that this decline not only erases the gains made before and after Trump’s re-entry into the White House but also ends the previous narrative of a rally fueled by policy expectations and regulatory green lights.

Price falls below ETF cost basis, market begins surrendering

Funding signals provide a more direct pressure indicator. According to Bloomberg data, over $740 million was withdrawn from more than 140 crypto-themed ETFs on Wednesday, with nearly $4 billion net outflow over three months. This is not limited to spot Bitcoin funds; Ether, XRP, Solana, and multi-coin products also experienced significant outflows and net asset value declines.

The cost basis of holdings amplifies the pain. Glassnode reports that the average cost basis for U.S. spot Bitcoin ETF holders is about $84,100, significantly higher than current prices, meaning many retail investors entering via ETFs are already at a paper loss.

Bloomberg points out that as capital dries up, liquidity thins, and narratives stagnate, the market is entering a deadlock of “waiting for a new story or surrendering through sell-off.”

Unlike seasoned players who have gone through multiple cycles, this incremental buying is entering after institutionalization and regulatory validation, with expectations more aligned with mainstream assets. Now, the withdrawal of ETFs, once seen as game changers, is instead accelerating confidence erosion.

Crypto investor Bruno Ver said that the speed of the decline caught many off guard and mentioned that investors who bought at high levels are under greater pressure. In contrast, some ETF supporters still emphasize that this is a “normal retracement cycle” for crypto assets, and ETFs’ role is to provide transparent, regulated access rather than eliminate risk.

Market conclusion: Washington can provide “legitimacy,” but not a “price bottom”

In this rapid retracement, the clearest message from the market is: policy can promote product supply, improve trading channels, and bring temporary sentiment premiums, but cannot prevent the cyclical deep retracements of high-volatility assets. As Nate Geraci states, downward volatility cannot be “eliminated” by the White House or regulators.

Peter Atwater interprets this cycle by noting: politics and regulation tend to follow rising market sentiment, often easing further at the “hottest moments of the party.” The current sharp decline is less an accident and more a return to risk pricing as speculative premiums recede.

Risk warning and disclaimer

        The market carries risks; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest accordingly at your own risk.