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Sidhartha Shukla writes on how retail investors inherited the risk during the latest crypto market meltdown.
Absorbing risk
This crypto winter feels different.
In past cycles, everyone seemed to suffer together. China banned ICOs and then mining. The market tanked. FTX collapsed in 2022. Contagion was swift and indiscriminate. Retail, VCs, institutions — all took the hit.
This time, the pain looks more selective.Retail investors appear to be bearing the brunt of the blow.
Bitcoin is hovering around $67,000, well below its October 2025 peak just above $126,000. It has languished since a seminal Oct. 10 meltdown. At the same time, the broader token market has never really recovered from the 2022 crash. For many retail investors, this is year four of disappointment.
A closer look at market data tells a stark story. Tokens outside Bitcoin and Ether have seen roughly $209 billion more selling than buying on major exchanges over the past 13 months, according to CryptoQuant. That suggests investors are seeking to sell rather than accumulate tokens at the first chance they get. Demand last matched supply in January 2025. Since then, it’s been one-way traffic.
The difference this cycle isn’t just price. It’s market structure. Since January 2024, when spot Bitcoin ETFs opened the door to traditional capital, crypto has been increasingly routed through Wall Street vehicles rather than traded peer-to-peer. That shift has changed who sets prices — and who absorbs risk.
Among the other clear examples: Digital Asset Treasury, or DAT, companies that mimic Michael Saylor’s strategy of hoarding tokens and selling equity exposure.
“Investor interest has softened meaningfully from December into January, marking a clear cooling phase across most segments. The most pronounced shift is in retail, where engagement has fallen to cycle lows and continues to act as a headwind for higher beta activity,” according to Crypto Insight Groups January 2026 Fund Manager Survey.
Vineet Budki of Sigma Capital compares the rush into DATs to the 2017 documentary “The China Hustle,” which chronicled how dubious Chinese firms tapped US markets post the 2008 financial crisis and left investors nursing losses. In the case of publicly-traded crypto accumulators, insiders were seen capturing the upside minus the downside risk that retail investors bore when the shares began trading.
“Locked tokens typically trade at steep discounts — 40% to 50% in cases like the Solana tokens sold by the FTX estate,” Budki said. “But in DAT structures, locked tokens were trading at a premium. It made no sense.”
He said the vehicles effectively provided exit liquidity at the expense of retail investors, with listed firms serving as distribution channels to offload even locked token supply. “Public companies are supposed to create value for shareholders,” Budki said. “This was about extracting it.”
The result is a market where the insiders appear to have rotated out. Retail is left holding the bag more so than in other downturns. And after 13 months of steady net selling in altcoins, there’s little sign of fresh institutional accumulation.
Volatility was always part of the bargain. What’s new is the investment cycle. When price discovery runs through public wrappers and locked supply trades at a premium, early holders get an exit and public investors inherit the risk.
Charting it out
A new class of digital money is reshaping how Americans move and store dollars — and Wall Street is racing to get a piece of it. ProShares is launching what it says is the first money market ETF designed to hold reserves for stablecoin issuers, entering a market whose size is still being decided in Washington.
Counting it out
86%
Brevan Howard has overhauled its position in BlackRock’s iShares Bitcoin Trust, becoming the largest seller of the spot ETF in the fourth quarter as Bitcoin’s rally unraveled. The hedge fund cut its stake in the ETF by about 86%, filings show.
Hearing them out
“The market structure really broke down on October 10th. We’ve never seen this steady and severity of a drawdown even in 2018 and 2022.”
Zach Lindquist
Managing partner at Pure Crypto.
Bitcoin’s price has fallen more than 40% as American money has retreated, with roughly $8.5 billion flowing out of US-listed spot Bitcoin exchange-traded funds since Oct. 10.
What we’re writing (and reading)
What we’re watching on Bloomberg TV
Activist investor Starboard Value is asking Riot Platforms to speed up its transition from Bitcoin miner to a data center company that could house hyperscaler tenants. Bloomberg’s Lauren Tara LaCapra discusses on “Bloomberg Deals”.
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