Bitcoin Drawdown Nears 40%; Weakness Suggests Lower Prices Coming
This report was originally sent directly to clients of Galaxy Trading and Galaxy Asset Management on February 1, 2026. Trade or invest with Galaxy to receive the most timely research directly in your inbox.
Executive Summary
Bitcoin dropped 15% between Monday, Jan. 28 and Saturday, Jan. 31, with the move escalating into the weekend. Saturday alone saw a 10% move that spurred one of the largest liquidation events in history, with more than $2 billion in long liquidations across futures trading venues. The price action brought BTCUSD as low as $75,644 on Coinbase Saturday, drifting below the U.S. ETFs’ average cost basis of $84k by as much as -10% on Saturday. At one point, BTCUSD pierced Strategy’s average cost basis of $76,037, and it nearly reached its 1-year low of $74,420 (achieved during the April 2025 “Tariff Tantrum”). 46% of Bitcoin supply is now underwater (i.e., the coins previously moved onchain when prices were higher). January close on Saturday evening saw Bitcoin complete 4 consecutive red monthly candles for the first time since 2018.
With the exception of 2017, Bitcoin has never experienced a 40% drawdown from all-time high that didn’t extend to 50+% from ATH within 3 months (a 50% drawdown from all-time high today would place BTC at $63k). There’s a significant gap in onchain ownership between $82k and $70k, which may increase the likelihood that Bitcoin trades lower in the near term to test demand in that range. Realized price is around $56k and the 200-week moving average is around $58k (note that these metrics climb higher every day that BTCUSD trades above them).
At the moment, we still see little evidence of significant accumulation from whales or long-term holders, although long-term holder profit taking has begun to notably abate. Catalysts remain hard to find and narratives are also working against Bitcoin as it fails to trade along with gold and silver as part of a market-wide “debasement hedge trade.” While passage of crypto market structure legislation (the “CLARITY Act”) could act as a near-term exogenous catalyst, odds of passage have diminished in recent weeks, and we see any positive momentum generated by passage more likely to yield benefit to altcoins than BTC.
While it could see chop around the historic max discount-to-ETF-cost-basis of -10% (currently around $76k), for the reasons above, there is a significant chance that BTC drifts towards the bottom of the supply gap ($70k) and then potentially tests the realized price ($56k) and 200-week moving average ($58k) over the coming weeks and months (though the longer it takes, convergence to those metrics could be at higher prices than today’s values). Those levels have historically marked cycle bottoms and made strong entry points for long-term investors.
Bitcoin Drawdowns
At the time of writing, Bitcoin is trading -38% from its October 6, 2025 all-time high price of $126,296, a level below prior-ATH not seen since the start of 2024.
Key Price Levels (Realized Price, 50w MA, 200w MA)
In each of the last 3 bull markets (2013/14, 2017/18, 2019, and 2021), the 50-week moving average served as a key support but, when it was lost, price ultimately reverted to the 200-week moving average. BTC lost the 50-week moving average in November 2025, and the 200-week moving average currently sits at $58k.
Similarly, Bitcoin’s realized price, a way of measuring the average cost basis for coins on the network based on their last movements onchain, currently sits around $56k. While it has historically traded below the realized price during past bear market bottoms, BTC has typically found support around or slightly below this level before trading higher.
A more recent look (2018-present) in linear scale shows the convergence of realized price and the 200-week moving average, which both sit near each other in the high $50k range.
ETF Flow Cost Basis Now Underwater
The U.S. Bitcoin ETPs launched in January 2024 and granted market access to new classes of investors. When Grayscale won its case against the Securities and Exchange Commission (SEC) at the D.C. Circuit Court of Appeals in August 2023, anticipation of the ETFs’ eventual launch drove a broad recovery in bitcoin prices. As of last week ending January 30, 2026, the U.S. Bitcoin ETFs have gathered a combined $54 billion in net inflows. Cumulative inflows peaked at $62.2 billion in early October 2025 and are now down -12.4% from their all-time high. ETF holders remain incredibly resilient given that underlying spot bitcoin is down nearly 40% from its all-time high.
However, the past two weeks were the 2nd and 3rd worst in Bitcoin ETF history, with combined outflows of -$2.8 billion. January 30 and 31 price action sent BTCUSD below the average ETF cost basis ($84k), based on prices during inflows, for since Summer 2024.
At the time of writing, BTC is currently trading -7.3% lower than the average ETF create cost basis ($84k), though it traded as low as -10% below that level on Saturday, January 31. BTC hasn’t traded below the average ETF create cost basis since Summer and early Fall 2024, when it reached as low as -9.9%. It’s reasonable to expect this level to serve as near-term support.
Supply Gab Between $70-80k
Observing Bitcoin supply based on when the coins last moved onchain, a gap in ownership is visible in the $70-80k range. Note, the vast majority of the ~194k BTC shown on the chart to have last traded between $77k and $79.5k did so just within the last 2 days.
Comparing this data (URPD) as of Feb. 1, 2026 to the date of the prior all-time high provides insight as to the origin of selling pressure since Oct. 6, 2025. Significant purchases have been made between $80k and $92k over the last 4 months, but all other price cohorts have contributed to sell pressure, with the largest chunk flowing from investors who last purchased above $111k. (Note that URPD measures coin movements and we utilize as a heuristic to indicate coin buying/selling).
Bitcoin Holders Nearing 50% in Loss
56% of bitcoin supply is currently held in profit (i.e., coins last moved when price was higher than the time of writing), while 46% of bitcoin supply is currently held at a loss. All prior bear market bottoms have seen a convergence of these metrics closer to 50-50, though 2015 and 2018 reached greater than 60% in loss. Historically, the convergence of these two metrics has signaled a multi-month if not cycle bottom.
Zooming in to 2018-present and viewing on a linear scale gives a clearer view of the current setup for this metric.
Recent Failure as a Debasement Hedge
Bitcoin’s underperformance relative to gold, silver, and other metals since the start of Q4 2025 has been widely reported by financial media. Macro and geopolitical uncertainty, driven both by tariffs and a shifting world order, combined with skepticism about the state of global sovereign debt has pushed investors into commodities and commodity monies. In such a chaotic environment, Bitcoin’s non-sovereign monetary fundamentals and permissionless transactability offer fundamental benefits, but instead bitcoin has traded lower while the time-honored staples have rallied. Bitcoin’s weakness during macro conditions which should favor it has harmed its narrative and re-routed focus to other assets.
Long-Term Holder Profit-Taking Has Abated
2024 and 2025 saw more profit taking in dollar terms by long-term holders than another other time in Bitcoin’s history, with $500m per day, every day on average, distributed in 2025. This distribution has finally abated, though it’s possible there are more long-term holders who are waiting for higher prices to sell. Future selling by long-term holders can create resistance to upwards movement. Nonetheless, the recent decline in long-term holder realized profit taking is notable and should signal we are closing in on a bottom. (Long-term holder realized profit is shown with 7d MA below).
Reverting BTCUSD to linear and zooming in to 2021-present shows how long-term holder selling creates headwinds for upward price movement and how market bottoms tend to coincide with reduction in such profit taking.
Outlook
We wrote at the end of last year that 2026 appeared “too chaotic” to form a clear end-of-year price prediction for BTC. If anything, the investing environment has only grown more chaotic in the 45 days since then. But the picture for BTCUSD has become clearer, with the downtrend much more firmly established – upwards momentum in January stalling out below $100k; a clean break of $80k and establishment of a near-term lower low over this past weekend. While we still lack concrete evidence of accumulation creating a firm bottom, a reduction in long-term holder selling does suggest more confidence for long-term holders at these prices. If bitcoin falls lower towards the 200-week moving average or the realized price, these levels should present strong entry points for long-term investors as they have in the past.
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