Where Did Bitcoin’s Retail Go? Look Offchain

Key takeaways:

• Onchain metrics suggest retail investors are asleep, but the ETFs’ AUM is growing

• Retail investors hold the majority of spot Bitcoin ETF shares — either directly or indirectly through investment advisers and hedge funds acting on their behalf.

• Direct retail investor demand may be dormant but not dead, especially outside the US, where self-custody remains essential.

There’s a widespread assumption that Bitcoin (BTC) cannot move higher because retail investor demand is drying up. Onchain data seems to support this narrative: Small wallet activity is at a multi-year low. But is this really the full picture?

Perhaps retail is still here, just not where we used to look. This cycle, a big part of retail demand may be flowing through TradFi rails: spot ETFs, pension funds and brokerage accounts. If ETFs are counted as retail, it may change how the Bitcoin market is understood.

Who is buying the spot Bitcoin ETFs?

Since the launch of spot Bitcoin ETFs in the US 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 advisers 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 Bloomberg analyst Eric Balchunas, investment advisers account for nearly half of the $21 billion in assets reported through 13F 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 (about 83,934 BTC), followed by brokerages and holding companies.

The CoinShares report adds color: Goldman Sachs leads among financial advisers with $1.8 billion invested, while Millennium Management tops hedge funds with $1.6 billion.

ETFs are retail too, in a way

It’s tempting to categorize ETF flows as purely institutional, in contrast to the familiar image of a small retail wallet stacking sats. From that…