Look Offchain. Take a look offchain

Takeaways:

• The AUM of ETFs is increasing, but Onchain suggests that retail investors may be asleep.

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

• Even though the demand for direct retail investors is waning, it’s not completely dead. This holds true outside of America, as self-sustainability remains a key factor.

Bitcoin (BTC), it is widely believed, cannot go higher. retail investor Demand is dwindling. Data from Onchain seems to confirm this story: Small wallet activity has reached a record low. This is not the complete picture.

Maybe retail still exists, it’s just that we don’t know where to find it. TradFi is likely to be a major conduit for retail demand this cycle. This includes spot ETFs and pension funds as well as brokerage accounts. It may affect the way Bitcoin is perceived if retail ETFs were counted.

Who buys the Bitcoin ETFs on spot?

Bitcoin entered many client portfolios after the US launched spot Bitcoin ETFs on January 20, 2024. This is because clients were hesitant to handle their own custody or did not possess the technical knowledge to do so.

ETFs appeal to institutions for the regulatory clarity they provide and their simplicity of accounting. Hedge funds and investment advisors are the two largest ETF owners, managing Bitcoin exposure both for retail and corporate customers. In addition, banks, pension funds, insurance companies, and insurers are now attempting to get involved, offering their clients exposure as well.

Together, ETF investors now collectively own about $135 billion worth of Bitcoin.

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. Following hedge funds with ETF shares worth $6.9 billion (about 83.934 BTC), brokerages, holding companies and other financial institutions are also involved.

CoinShares report Goldman Sachs tops the list of financial advisors and hedge funds, respectively.

Retail ETFs also exist in some ways

The temptation is to label ETFs as institutional flows, which contrasts with the common image of retail wallets stacking up sats. From that lens, yes—direct retail demand has all but disappeared..

As André Dragosch, the head of research of Bitwise, said to Cointelegraph, 

“Retail has been the major distributor of Bitcoin in 2025 so far, based on our calculations. Meanwhile, both public corporations as well as funds and ETPs have been the biggest source of demand for Bitcoin in 2025.”

Dragosch went on to add that

“It is certainly true that retail participation is also heavily expressed via ETPs/ETFs since these investment vehicles remain heavily retail-dominated. This is evident in the most recent 13F filings in the US which still indicate that the percentage of retail investors in US spot Bitcoin ETFs is close to 75%.”

It may be necessary to change the way onchain data are interpreted if a BTC ETF’s end-holder is a retailer. It may be that the Bitcoin market is now ruled by the retail clientele who prefer to store their Bitcoins in brokerage accounts, rather than a wallet. This approach is contrary to Bitcoin’s origins, but it appeals to those who still believe in the investment thesis.

Even if retail interest doesn’t show up onchain, the explosive growth of spot ETFs shows that there is still a lot of it. BlackRock’s iShares Bitcoin Trust (IBIT) has already generated more revenue than its flagship S&P 500 ETF (IVV), according to Bloomberg—hardly a niche phenomenon.

Related: Why can’t Bitcoin price break $112K all-time highs? BTC analysts explain

Why hasn’t Bitcoin reached new highs yet?

Bitcoins prices remain under pressure even though the ETF is being demanded.

CryptoQuant is a reputable company. graph In January 2025 the apparent demand for Bitcoin peaked at $1.6 million. This is double what ETFs and Strategies combined inflows were. This figure, which has been impacted by steady ETF flows, is currently in negative territory at -$857,000.

In other words, current inflows—even with ETFs—aren’t enough to offset the ongoing outflows. It’s possible that the market needs a big catalyst. interest rate cuts, to reignite demand. A trigger of this kind would benefit institutions, and in particular their customers who play a growing role within the Bitcoin eco-system. 

Alexandre Stachtchenko acknowledges the shift in strategy at Paymium.

“Eventually, retail will have to go through the TradFi rails, it is my long-standing conviction.” 

He clarifies that this does not mean the direct demand from retail will disappear. Retail participants from places such as Nigeria and Argentina may continue to purchase and hold BTC direct, even though wealthier US investors might opt for exposure through BlackRock or peers.

So perhaps direct retail demand hasn’t disappeared—just gone quiet. In the right circumstances, direct retail demand could still emerge.

The article does not provide legal advice or investment recommendations and it is intended only for informational purposes. These are solely the opinions, views, and thoughts of the author and may not reflect the opinions and views of Cointelegraph.