Bitcoin ETF investors held up far better than many expected during a drawdown of more than 50%. Bloomberg senior ETF analyst James Seyffart said on Coin Stories that outflows amounted to less than 15% of total inflows from the first two years, a sign that ETF buyers have behaved more like long-term holders than weak hands.
He said spot Bitcoin ETFs pulled in roughly $25 billion to $30 billion from the lows through October 10. After that, about $9 billion flowed out, drawing heavy attention. Seyffart argued the headline number looked less dramatic in context. From February 23 to late March, around $2 billion to $2.5 billion had already returned, reversing part of the previous selling.
Small portfolio allocations changed holder behavior
Seyffart’s explanation centers on position sizing. Many ETF buyers are not allocating the bulk of their wealth to Bitcoin. In his view, they often treat it as a small sleeve inside a broader portfolio, commonly around 1%, 3%, or 5%. That changes how a sharp correction feels and how investors respond to it.
If a portfolio target is 5% and Bitcoin falls enough to cut that weight to 2.5%, rebalancing can lead to new purchases rather than panic selling. He said that pattern helps explain why ETF holders stayed in place during the decline and, in some cases, added exposure on the way down.
13F filings reveal only part of the ownership picture
On holder composition, Seyffart said 13F filings show only long positions and capture just part of the market. By the end of September 2025, known holders represented about 27% of the base. After some fourth-quarter selling by hedge funds and advisers, that figure slipped to below 25%.
Among the holders that can be identified, investment advisers, wealth advisers, and broker-dealers remain the largest buyer group. Seyffart also mentioned that Harvard’s endowment holds a large position, while Yale holds related assets including Ethereum. Even so, he stressed that most ownership remains opaque, with a large share likely sitting with retail investors using brokerage platforms such as Robinhood and Schwab, or with international institutions that do not file 13F reports.
Bitcoin ETF shelf grows to 12 products, with IBIT still dominant
Seyffart said the market may now have 12 Bitcoin-related ETF products when futures funds, buffered strategies, and covered-call products are included. In his view, that means a full ETF sub-ecosystem has started to form around Bitcoin.
BlackRock’s IBIT remains the clear leader by trading volume, assets, and net flows. Other funds such as VanEck’s HODL, Bitwise products, and Fidelity’s FBTC are also operating successfully. He said even smaller products have gathered hundreds of millions of dollars and are profitable, which has kept the lineup viable.
Morgan Stanley’s ETF plan stands out on Wall Street
Another major point from the interview was Morgan Stanley’s move toward launching a branded Bitcoin ETF. Seyffart described that as a significant development because the bank is one of the largest in the United States and rarely issues ETFs under its own name.
He noted that Morgan Stanley’s platform serves more than $6 trillion in client assets. If clients want Bitcoin exposure inside their portfolios, the firm now has a reason to offer that product directly instead of sending assets to another issuer. Seyffart also said he was surprised the bank appeared to be applying for Bitcoin, Ether, and Solana ETFs at the same time.
Based on the filings he has seen so far, he said the Morgan Stanley product looks like another standard spot ETF with little visible differentiation. Other applications in the market are trying to stand out through structures tied to covered calls or even carbon credits.
In-kind redemptions are improving product efficiency
Seyffart also highlighted a structural change in the US Bitcoin ETF market. Issuers were initially restricted to cash-based creation and redemption, but in-kind redemptions are now allowed. That means Bitcoin can be exchanged directly for ETF shares, and the process can work in reverse.
He said the change has made the products far more efficient. In the US, funds such as IBIT and FBTC trade with spreads of only a few cents and almost no trading fees. Earlier structures required more cash movements because some banks and market makers involved in ETF operations were not permitted to touch crypto markets directly. That friction is now being reduced.
Coinbase custody concentration remains a watch point
Even with the products running smoothly, Seyffart said custody concentration is still a real issue to watch. Coinbase, he said, custodies most of Michael Saylor’s Bitcoin and also holds about two-thirds to three-quarters of the Bitcoin backing ETFs.
Some diversification efforts are emerging. BlackRock has chosen three staking service providers, and BitGo and Gemini appear in custody arrangements for some issuers. Still, a large share of ETF Bitcoin remains concentrated inside Coinbase’s custody system. Seyffart said that concentration is one of the areas he continues to monitor with some concern.
Bitcoin and gold ETF flows have moved in opposite directions
Seyffart said Bitcoin ETF and gold ETF flows have been almost negatively correlated over the past eight months. During the period from October to February, Bitcoin ETFs saw outflows while gold ETFs attracted strong inflows. More recently, that direction has begun to reverse as money starts leaving gold funds.
Gold ETFs still hold a much larger asset base. The first gold ETF launched in 2004 and helped support a bull market that lasted until 2011. By December 2024, total Bitcoin ETF assets had come within a few tens of billions of dollars of gold ETF assets. After Bitcoin selling and a combination of rising gold prices and fresh inflows in 2025, gold ETF assets are now close to twice the size of Bitcoin ETFs.