Retail Bitcoin Demand Evolves With ETFs, $135 Billion Held By Institutions

Despite widespread assumptions that retail investor demand for Bitcoin (BTC) is waning, onchain metrics suggesting a decline in small wallet activity may not tell the full story. Retail investors, who traditionally held the majority of spot Bitcoin ETF shares, either directly or indirectly through investment advisers and hedge funds, are now increasingly turning to spot ETFs, pension funds, and brokerage accounts. This shift indicates that retail demand is not dormant but has evolved, particularly outside the US, where self-custody remains crucial.

Since the launch of spot Bitcoin ETFs in January 2024, Bitcoin has entered the portfolios of clients who might never have held it directly due to a lack of technical confidence or unwillingness to manage self-custody. Institutions also buy ETFs for their regulatory clarity and ease of accounting. Among them, investment advisors and hedge funds are the biggest ETF holders, managing Bitcoin exposure on behalf of both retail and corporate clients. Banks, insurers, and pension funds are also stepping in, not only holding BTC but offering exposure to their customers as well.

Collectively, ETF shareholders now own approximately $135 billion in Bitcoin. According to an analyst, investment advisers account for nearly half of the $21 billion in assets reported through filings—a growing subset of total ETF exposure that now represents around 20% of all ETF holdings. Hedge funds follow with $6.9 billion worth of ETF shares, followed by brokerages and holding companies. Goldman Sachs leads among financial advisers with $1.8 billion invested, while Millennium Management tops hedge funds with $1.6 billion.

It’s tempting to categorize ETF flows as purely institutional, contrasting with the familiar image of a small retail wallet stacking sats. However, if the end holder of a BTC ETF share is a retail client, it may be time to reconsider how onchain data is interpreted. This may be the new reality of the Bitcoin market: new retail demand prefers to keep its Bitcoin in a brokerage account, and not a self-custodial wallet. While antithetical to Bitcoin’s original ethos, this approach appeals to many who nonetheless believe in its investment thesis.

The explosive success of spot ETFs is evidence of retail interest, even if it doesn’t register onchain. BlackRock’s iShares Bitcoin Trust has already generated more revenue than its flagship S&P 500 ETF, hardly a niche phenomenon. Yet even with the ETF demand, Bitcoin’s price remains under pressure. Current inflows—even with ETFs—aren’t enough to offset the ongoing outflows. The market may need a major catalyst, such as interest rate cuts, to reignite demand. Such a trigger would primarily benefit institutions and their clients, who now play an increasingly central role in the Bitcoin ecosystem.

Alexandre Stachtchenko, strategy director at a crypto exchange, acknowledges this shift: “Eventually, retail will have to go through the TradFi rails, it is my long-standing conviction.” Yet he clarifies this doesn’t mean direct retail demand will vanish. While wealthier investors may opt for exposure via BlackRock and peers, retail participants in regions like Nigeria or Argentina will likely continue to buy and hold BTC directly. So perhaps direct retail demand hasn’t disappeared—just gone quiet. And in the right conditions, it could still reemerge.