80% of Bitcoin ETF demand comes from retail investors: Binance

Retail investors are responsible for most of the demand for spot Bitcoin exchange-traded funds, according to new research from crypto exchange Binance. 

In an Oct. 25 research report on crypto ETFs, Binance analysts shared that non-institutional investors accounted for nearly 80% of the total assets under management (AUM) in spot BTC ETFs as of Oct. 10. 

Spot Bitcoin ETFs launched in January 2024 in a watershed moment for crypto and have generated $21.6 billion in net inflows in the 10 months since being made available to investors. 

Binance analysts noted that much of the spot Bitcoin ETF’s $63.3 billion accumulated as assets under management since their launch in January was not necessarily fresh investment in the crypto space. 

Instead, it appears that a “notable portion” of the buying activity can be traced back to retail investors rotating their holdings from digital wallets and centralized exchanges into the funds, which offer increased regulatory protections.  

“Spot ETFs are serving dual roles: not only onboarding new investors but also attracting existing investors who prefer the regulated structure of ETFs over other, more complex options, such as direct on-chain holdings or illiquid, high-fee alternatives like Grayscale’s Bitcoin Trust,” wrote Binance. 

Institutional demand is still growing

While retail investors account for the lion’s share of investment into the funds, Binance analysts noted a growing demand from the institutional side, with investment advisers and hedge funds standing as the two fastest-growing parties of interest. 

However, many institutions are still yet to make headway on Bitcoin funds, and those that have invested remain “reserved” in their deployment of capital. 

While many large traditional financial firms have looked to capitalize on the Bitcoin ETF gold rush, United States investment giant Vanguard has been famously resistant to spot Bitcoin ETFs. 

Vanguard, the second-largest ETF issuer in the world, has repeatedly refused to launch any Bitcoin or crypto ETFs. Its new CEO, Salim Ramji, re-iterated this anti-crypto stance again on Aug. 14, saying the asset manager will “not be launching any crypto ETFs.” 

This “cautious approach” aligns with how TradFi institutions typically engage with the crypto sector, said Binance analysts. 

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“Although institutions are expected to drive trade sizes higher over time, there hasn’t been a material change over the year, likely due to volatile market conditions and global liquidity uncertainties,” the report added. 

Bitcoin ETF inflows heat up, which could be a bad thing

Bitcoin ETFs have been witnessing an “unusually large” streak of inflows in recent weeks, causing one analyst to warn of a potential Bitcoin price dip in the near term.  

Between Oct. 11 and 23, spot Bitcoin ETFs generated a total of $2.88 billion in inflows, with just one outflow day of $79.1 million on Oct. 22 — a relative outflow of just 2.7% — according to Farside data.

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