Bitcoin is down over 45% from its October 2025 peak, spot crypto fund AUM has dropped to $130 billion, and roughly 40% of spot Bitcoin ETF holders would need a 50% recovery just to break even.
But according to Bitwise CIO Matt Hougan and GraniteShares CEO Will Rhind in a recent CNBC interview, the people selling are not who most expect.
ETF Investors Are Not Driving the Bitcoin Sell-Off
Net outflows from Bitcoin ETFs have been roughly $7 billion, a small number compared to total AUM. Most of the decline comes from price drops, not redemptions.
The primary sellers are long-term, original crypto holders who built positions over 15 years and are now trimming. On the other side, financial advisor channels have been buying the dip.
Hedge funds and short-term traders within the same ETFs are the ones creating outflows, which masks the advisor-side buying entirely.
Hougan 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 Puts Pressure on Bitcoin
Gold breaking past $5,000 an ounce while Bitcoin falls has made things harder for crypto investors.
Rhind addressed it:
“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.”
This Bitcoin Bear Market Looks Different
In past bear markets, Bitcoin retraced 77-85%. This time, the drawdown sits at around 50-52%. Hougan said ETF-based long-term holders may be the reason for the shallower drop, acting as a price floor even if they have not prevented major losses.
Outflows have also slowed to just under $200 million despite heavy price pressure, which has historically signaled a possible turning point.
Wall Street Firms Open Doors to Crypto
All four major firms, Morgan Stanley, Merrill Lynch, Wells Fargo, and UBS, now allow exposure to crypto products. Morgan Stanley has filed to launch its own spot Bitcoin ETF after clearing its roughly 15,000 financial advisors to pitch existing products.
Hougan said a sharp recovery is unlikely.
“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,” he said.
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