How crypto's recent volatility impacts ETF investors, according to Bitwise CIO and GraniteShares CEO

Overview - Assets under management for spot crypto funds have decreased to $130 billion, marking the lowest level since March of the previous year, driven by significant net outflows and a decline in Bitcoin prices [1][2]. Market Dynamics - Bitcoin has fallen over 50% from its peak in October 2025, with approximately $7 billion in outflows, but most ETF investors remain committed for the long term [2][3]. - The selling pressure is primarily from original crypto investors who have been gradually trimming their positions rather than mass selling [3]. - Currently, about 40% of spot Bitcoin ETF holders are experiencing losses and require a 50% increase in Bitcoin prices to break even [4]. Investor Sentiment - There is a prevailing negative sentiment among investors, exacerbated by the rising price of gold, which has reached all-time highs, contrasting with the performance of cryptocurrencies [5][6]. - The lack of dip buying in ETFs suggests that many investors are hesitant, with flows often reflecting the price movements of Bitcoin or Ethereum rather than counter-trend buying [7][10]. ETF Flows and Strategies - Some financial advisors are viewing the current market as an opportunity, leading to inflows in certain products, while hedge funds and traders are contributing to outflows [8][9]. - The ETF market is characterized by two distinct investor groups: those seeking short-term gains and those focused on long-term investments [10][32]. - The recent performance of spot ETFs has not provided the same price support for Bitcoin as seen in previous cycles, indicating a shift in market dynamics [10][14]. Future Trends - There is growing interest in diversified index funds within the crypto space, similar to trends seen in traditional asset classes, as investors seek broader exposure [20][21]. - The retailization of institutional strategies is becoming a significant trend, with more retail investors gaining access to complex investment strategies previously reserved for high-net-worth individuals [34][36]. - The potential for more banks to issue crypto products could enhance market flows and investor participation [28][29].