Bitcoin has declined over 45% from its October 2025 peak, with spot crypto fund assets under management (AUM) dropping to $130 billion. Approximately 40% of spot Bitcoin ETF holders would require a 50% price recovery just to break even. However, according to Bitwise Chief Investment Officer Matt Hougan and GraniteShares CEO Will Rhind in a recent CNBC interview, the entities driving the sell-off are not the typical suspects.
ETF Investors Are Not the Primary Sellers: Net outflows from Bitcoin ETFs have totaled roughly $7 billion, a relatively small figure compared to total AUM. The majority of the decline is attributed to price depreciation, not investor redemptions. The primary sellers are identified as long-term, original crypto holders who built positions over 15 years and are now trimming their portfolios. Conversely, financial advisor channels have been buying the dip. Hougan explained that hedge funds and short-term traders within the same ETFs are creating the outflows, which masks the steady buying from advisors. He described it as "two different markets inside the same product: fast money trading the next month versus long-term allocators investing over 4-5 years."
Gold Pressure on Crypto Sentiment: The surge in gold, breaking past $5,000 an ounce while Bitcoin falls, has added pressure. Rhind commented, "It’s tough to be a Bitcoin investor or crypto investor right now when you look at the price of gold going through $5,000 an ounce… the precious metals thing has really caught crypto investors sort of off guard. This is not supposed to happen."
A Different Bear Market Dynamic: Historically, Bitcoin bear markets have seen retracements of 77-85%. The current drawdown is shallower, around 50-52%. Hougan suggested that ETF-based long-term holders may be providing a price floor, preventing a steeper decline. Notably, ETF outflows have slowed to just under $200 million despite price pressure, a pattern that has historically signaled a potential turning point.
Wall Street Opens Doors: Major financial institutions—Morgan Stanley, Merrill Lynch, Wells Fargo, and UBS—now permit exposure to crypto products. Morgan Stanley has filed to launch its own spot Bitcoin ETF after authorizing its roughly 15,000 financial advisors to pitch existing products. Hougan tempered expectations for a sharp recovery, stating, "Usually these bear markets sort of die in exhaustion, not excitement. I would expect it to sort of bottom out slowly and then things like Morgan Stanley going all in on Bitcoin will be part of what accelerates us when we’re on the upside."
Renewed Institutional Inflows: Supporting this analysis, the latest ETF flow data shows U.S. spot Bitcoin ETFs registered net inflows, indicating continued selective institutional engagement. These inflows, while moderate, occurred against a backdrop of broader market volatility and were concentrated in large, established Bitcoin funds. This contrasts with non-Bitcoin cryptocurrency ETFs, such as those linked to Ethereum, which experienced limited activity or net outflows, highlighting a institutional preference for Bitcoin's liquidity and established market depth during uncertain times.
