Key Points:
On-chain metrics show that retail investors are in a dormant state, but the assets under management of ETFs are growing.
Retail investors hold the majority of spot Bitcoin ETF shares—whether directly or indirectly through their investment advisors and hedge funds.
Direct retail investment demand may be dormant but has not disappeared, especially outside the U.S., where self-custody remains crucial.
It is widely believed that Bitcoin (BTC) cannot rise because retail investor demand is drying up. On-chain data seems to support this claim: small wallet activity is at a multi-year low. But is this really the whole story?
Perhaps retail investors still exist; they are just in places we are no longer looking. Much of the retail demand in this cycle may be flowing through traditional financial channels: spot ETFs, pensions, and brokerage accounts. Viewing ETFs as retail could change the understanding of the Bitcoin market.
Since the U.S. launched the spot Bitcoin ETF in January 2024, Bitcoin has entered the portfolios of clients who may have never directly held Bitcoin due to a lack of technical confidence or unwillingness to manage self-custody.
Institutions are also buying ETFs for regulatory clarity and accounting convenience. Among them, investment advisors and hedge funds are the largest ETF holders, managing Bitcoin exposure on behalf of retail and corporate clients. Banks, insurance companies, and pension funds are also getting involved, holding not only BTC but also providing exposure for their clients.
Overall, ETF shareholders now hold approximately $135 billion worth of Bitcoin.
According to Bloomberg analyst Eric Balchunas, investment advisors account for nearly half of the $21 billion in assets reported through 13F filings—a growing subset of total ETF exposure, now about 20% of all ETF holdings. Hedge funds follow closely, holding ETF shares worth $6.9 billion (approximately 83,934 BTC), followed by brokerage firms and holding companies.
A report from CoinShares adds details: Goldman Sachs leads among financial advisors with an investment of $1.8 billion, while Millennium Management tops the hedge fund category with an investment of $1.6 billion.
It is tempting to view ETF flows as purely institutional behavior, contrasting with the familiar image of small retail wallets accumulating Bitcoin. From this perspective, yes—direct retail demand has nearly vanished.
As Bitwise Research Director André Dragosch told Cointelegraph: "According to our calculations, retail has been the primary distributor of Bitcoin so far in 2025. Meanwhile, public companies, as well as funds and ETPs, have been the largest sources of Bitcoin demand in 2025."
However, Dragosch added: "Indeed, retail participation is also expressed significantly through ETPs/ETFs, as these investment tools remain predominantly retail-focused. This is evident in the recent 13F filings from the U.S., which still indicate that retail investors account for nearly 75% of the U.S. spot Bitcoin ETF."
Therefore, if the ultimate holders of BTC ETF shares are retail clients, it may be time to reconsider the interpretation of on-chain data. This could be a new reality for the Bitcoin market: new retail demand is more willing to keep their Bitcoin in brokerage accounts rather than self-custody wallets. While this contradicts the original idea of Bitcoin, this approach appeals to many who still believe in its investment theory.
The explosive success of spot ETFs is evidence of retail interest, even if it hasn't registered on-chain. According to Bloomberg, BlackRock's iShares Bitcoin Trust (IBIT) has generated more revenue than its flagship S&P 500 ETF (IVV), which is far from a niche phenomenon.
However, even with ETF demand, Bitcoin's price remains under pressure.
As shown in CryptoQuant's charts, in January 2025, Bitcoin's apparent demand reached about $1.6 million, double the total inflows from ETFs and strategies. Today, as ETF flows stabilize, this figure has turned negative, dropping to -$857,000.
In other words, even with ETFs, current inflows are insufficient to offset ongoing outflows. The market may need a significant catalyst, such as a rate cut, to reignite demand. Such a trigger would primarily benefit institutions and their clients, who are now playing an increasingly important role in the Bitcoin ecosystem.
Alexandre Stachtchenko, Strategic Director of the French cryptocurrency exchange Paymium, acknowledged this shift: "Ultimately, retail will have to go through traditional financial channels, which has been my belief for a long time."
However, he clarified that this does not mean direct retail demand will disappear. While wealthy investors in the U.S. may choose to gain exposure through BlackRock and its peers, retail participants in places like Nigeria or Argentina may continue to buy and hold BTC directly.
Therefore, perhaps direct retail demand has not disappeared—it has just become quiet. Under the right conditions, it may still re-emerge.
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Original: “Retail Investor Demand for Bitcoin Has Not Disappeared; They Are Pouring into Spot BTC ETFs”
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