The Rise of ETFs Challenges Bitcoin's Self-Custody Roots
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Bitcoin ETFs and institutional products are reshaping a key crypto ethos rooted in Satoshi Nakamoto’s vision: financial self-sovereignty. According to onchain data, Bitcoin self-custody has been steadily declining since January 2024 — the same month Bitcoin spot ETFs were approved.
After 15 years of steady growth, Bitcoin address activity is dropping. Active addresses fell from nearly 1 million to 650,000 in just six months - the lowest since 2019.
Analyst Willy Woo said on X: "Since spot ETFs became available the growth rate of self-custody users has been in decline."
This marks a behavioral shift: more investors are choosing institutional custody like ETFs over self-managed wallets.
The trend is part of Bitcoin's natural integration into the traditional financial system as more investors join the crypto space via BTC funds. For others, however, it marks a departure from individual sovereignty and Bitcoin's original purpose.
A community member wrote on X: "ETFs didn't steal users from cold storage... They opened the market to those who were locked behind compliance walls."
The Rise and Convenience of Bitcoin ETFsThe launch of spot Bitcoin ETFs by BlackRock, Fidelity, and Grayscale in 2024 marked a turning point in Bitcoin’s integration with TradFi.
The ETFs gave investors regulated, institution-grade access to the cryptocurrency, without the need to manage wallets, exchanges or private keys. They offer tax advantages, institutional-grade custody, and the convenience of traditional brokerages.
Market demand was strong from the start. Within the first 18 months, spot Bitcoin ETFs saw around $50 billion in net inflows, with BlackRock's IBIT leading the pack at $53 billion. By July 18, 2025, IBIT had grown to $83 billion in assets under management, tripling in just 200 trading days. It now holds over 700,000 BTC, nearly 100,000 more than Fidelity's FBTC.
According to Bloomberg analyst Eric Balchunas, IBIT became the fastest ETF in history to reach $80 billion, achieving the milestone in 374 days, far ahead of the previous record — 1,814 days — set by Vanguard's VOO.
Expanding Institutional AdoptionBitcoin ETFs aren't the only traditional gateway into BTC. In recent years, Bitcoin treasury companies — businesses or investment vehicles that hold Bitcoin on their balance sheets as a strategic reserve asset — have evolved from a handful of high-conviction players like MicroStrategy and Tesla into a broader institutional movement.
The number of public companies holding BTC increased to 125 by the end of Q2 2025 — a 58% surge from the previous quarter. As of mid-2025, over 250 organizations, including public companies, private firms, ETFs and pension funds, now hold BTC on their balance sheets.
Bitcoin treasury companies provide indirect BTC exposure without the hassle of private keys or crypto exchanges. Much like ETFs, they remove the need for self-custody while ensuring regulatory oversight and secure asset storage. As institutional adoption rises, the crypto community must reckon with a critical question: is convenience worth compromising on decentralization?
