Published: Thursday, February 5, 2026 · 11:30 PM | Updated: Thursday, February 5, 2026 · 11:30 PM
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(Bloomberg) — Retail investors who piled into the Trump administration’s promised crypto paradise via Wall Street-approved funds are now learning an expensive lesson in market gravity.
Bitcoin and a slew of newly minted altcoin exchange-traded funds have crashed, erasing all gains made since just before Donald Trump retook the White House and wiping out the speculative premium that had defined the era’s digital-asset boom.
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Despite the president’s pledge to make America the world’s crypto capital, Bitcoin has plunged 50% from its peak to trade around $63,000. Cryptocurrencies beyond Bitcoin have fared even worse, with a gauge tracking 50 smaller tokens tumbling 67% from a recent peak in October. Overall, the market has shed at least $700 billion in value over the past week.
The carnage marks a swift reversal for an asset class Trump vowed to elevate into a national infrastructure priority. Regulators, spurred by the White House’s pro-digital-asset mandate, cleared the path for a flood of exchange-traded products. Money managers moved quickly to capitalize, rolling out funds tied not only to blue-chip tokens but also to riskier ones, packaging them into easily tradable ETFs that spanned speculative strategies, thematic bets and income-focused wrappers.
For retail investors, however, the arrival of institutional backing has so far brought more pain than protection.
“Having a pro-crypto administration doesn’t magically eliminate the category’s downside volatility, and any investor who expected otherwise is learning that lesson the hard way,” said Nate Geraci, president of NovaDius Wealth Management. “Like many other asset classes, crypto is subject to inevitable periods of sharp drawdowns — something neither the White House nor regulators can prevent.”
According to crypto-data firm Glassnode, the average cost basis for US spot-Bitcoin ETF holders sits around $84,100 — meaning many are in the red as Bitcoin trades well below that level. While the paper losses are snowballing, the psychological toll can be even more exacerbating.
Unlike veteran token holders hardened by cycles of volatility, this new cohort was drawn in after institutional and regulatory validation of the asset class. Now, with the same ETFs that were billed as game-changers delivering red ink, conviction is fraying.
The euphoria that defined the post-election rally — powered by Trump’s embrace of crypto and a regulatory green light — has given way to silence. Flows have dried up, liquidity has thinned, and the narrative has stalled. What remains is a reluctant holding pattern, where investors wait for a new story to believe in — or a new low to capitulate.
Over $740 million was pulled from the more than 140 crypto-themed exchange-traded funds on Wednesday alone — a number that swells to nearly $4 billion over the past three months, Bloomberg data show. While much of that reflects outflows from spot-Bitcoin funds, Ether, XRP, Solana, and multi-coin products have also seen steep losses.
The pullback has stung even seasoned crypto believers. Bruno Ver, a long-time investor who holds the WLFI token tied to Trump-linked World Liberty Financial, says the speed of the crash caught many off guard.
“I didn’t expect a bear market this soon, to be honest,” he said. “This cycle is different — I’m hoping it’s because it’s maturing.”
But he adds that frustration is running even higher among newer entrants who bought near Bitcoin’s peak. “The ones who bought at $120,000 — it hurts. They’re mad at themselves. Who else? I don’t think you should be mad at Donald Trump or any politicians.”
Crypto ETF backers say the pain comes with the territory. Bitcoin has survived every brutal drawdown in its history — often 70% or more — only to come back stronger. To them, this is no crisis, just another buying opportunity on the road to new highs.
The ETFs, they argue, are working exactly as intended: giving retail investors regulated, transparent access to a volatile asset class. No one expects stock funds to insulate buyers from a tech rout — why should crypto be any different? And not all tokens are equal: Bitcoin, with its liquidity and institutional support, isn’t Dogecoin.
But narrative only goes so far. In the meantime, the numbers are brutal.
Strategy Inc., the world’s largest corporate crypto treasury, confirmed in its earnings announcement Thursday a net loss of $12.4 billion for the fourth quarter, driven by the mark-to-market decline in its vast holdings.
Ventures tied to the Trump family are also taking fresh hits. American Bitcoin Corp., co-founded by Eric Trump, cratered anew Thursday. A token from Trump-aligned World Liberty Financial has shed more than a quarter of its value in the past week.
For rookie traders who mistook a presidential endorsement of an asset class for a price floor, the lesson is clear: Washington can offer regulatory legitimacy, but not immunity from market volatility. As momentum fades and leverage unwinds, the Trump-era crypto rally is giving way to a brutal repricing — and a crash course in speculation’s limits.
Look at history, says Peter Atwater, founder of Financial Insyghts. Political leaders and regulators often embrace laissez-faire policies at moments of peak confidence. He points to the repeal of Glass–Steagall and the merger of commercial and investment banks, which came just ahead of the dot-com bust. The same pattern held, he added, in the run-up to the global financial crisis.
“Washington follows mood. It always wants to keep a party going at its peak,” he said. “That we are now seeing a sharp selloff in crypto is hardly surprising given history.”
–With assistance from Lu Wang and Denitsa Tsekova.
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