The market dynamics for Bitcoin have shifted as US spot exchange-traded funds now represent over 5% of the total net inflows into the asset.
As reported by Glassnode, the 12 funds have enabled institutions to emerge as a marginal source of demand for the leading digital asset. This conclusion was drawn from comparing Bitcoin’s post-ETF inflows with the capital used for spot ETF creation.
Since their inception, net capital inflows into Bitcoin have reached approximately $661 billion.
Data from Glassnode indicates that 5.2% of this amount can be directly attributed to coins purchased by US spot ETFs, a figure that corresponds with their 6-7% share of the circulating supply.
In light of this, Glassnode concluded that ETFs have transformed how Bitcoin is accessed, traded, and incorporated into portfolios in less than two years since their launch.
How ETFs have altered Bitcoin’s flow dynamics
The advent of regulated, brokerage-eligible Bitcoin exposure has resulted in a noticeable change in liquidity behavior.
ETF trading volume has increased from about $1 billion daily at launch to sustained levels exceeding $5 billion. Notably, the sector has even reached peaks of over $9 billion during periods of significant volatility.
These inflows have become a fundamental aspect of the market, particularly evident during key turning points when ETF turnover accelerates early in rallies and decelerates during corrections.
This trend underscores the extent to which Wall Street volume now drives price discovery.
For perspective, BlackRock’s IBIT fund alone generated $6.9 billion in turnover during a record trading session following the October deleveraging event, demonstrating how one product can significantly impact intra-day liquidity and market sentiment.
This transition represents a silent shift of market influence from crypto-centric exchanges to regulated intermediaries, whose transactions increasingly dictate Bitcoin’s cycles.
Moreover, the assets managed by these ETFs tell a parallel story. U.S.-listed Bitcoin ETFs now hold approximately 1.36 million BTC, valued at around $168 billion.
This accounts for nearly 7% of circulating supply, shifting exposure from self-custody wallets to custodial, audited vehicles that can be utilized by financial advisers and asset managers on a larger scale.
This development has transformed the profile of long-term holders, embedding Bitcoin more deeply into institutional investment strategies.
A new institutional landscape takes shape
The emergence of spot ETFs has also altered the derivatives market.
Bitcoin futures and perpetual swap markets have grown alongside the expansion of ETF exposure, with open interest across exchanges reaching an all-time high of $67.9 billion.
While perpetuals remain favored among crypto-native traders, the Chicago Mercantile Exchange (CME) has become the hub for institutional positioning. CME now holds more than $20.6 billion in open interest, accounting for about 30% of the global total.
The notable correlation between CME open interest and US ETF AUM reinforces the trend.
Glassnode has observed that institutional investors often pair ETF inflows with short futures positions to implement basis trading strategies, earning yield from the gap between spot and futures markets.
This creates a feedback loop where ETF demand, futures hedging, and yield strategies reinforce one another, leading to a market structure that significantly differs from the retail-driven cycles of previous years.
Ultimately, the ETFs have created a two-tiered Bitcoin market.
On-chain settlement continues to support the asset’s monetary policy and security model; meanwhile, off-chain financial instruments such as ETFs, CME futures, and brokerage accounts mediate a majority of the volume and liquidity.
This institutional layer functions at scale and speed, with transaction flows that can surpass those of the native spot exchanges that defined the earlier days of Bitcoin.
Bitcoin activity transitions off-chain
This trend towards custodial and brokerage infrastructure is evident in network behavior.
Glassnode points out that one of the most telling indicators of Bitcoin adoption, the Active Entities metric, reveals a structural decline in on-chain participation since ETF approval.
The number of unique entities completing transactions daily has decreased from approximately 240,000 to about 170,000, dipping below the previous cycle’s minimum.
While spikes driven by volatility continue to occur, the overall trend indicates a change in how Bitcoin is accessed.
Trading that once occurred through on-chain transfers or exchange deposits is now being done through ETF orders routed by broker-dealers.
Retail investors who traditionally engaged with Bitcoin via centralized exchanges are increasingly turning to brokerage platforms, while institutions are opting for ETF creations and redemptions instead of native spot markets.
Thus, the decrease in Active Entities should not be interpreted as weakening adoption but rather as a reallocation of activities towards off-chain venues that dominate user engagements.
The new center of power in Bitcoin markets
The cumulative result of these changes is the rise of institutions as the key drivers of Bitcoin’s liquidity, flow dynamics, and price formation.
Spot ETFs have simplified access to the asset, integrated Bitcoin into conventional portfolio strategies, and cultivated a market environment where the volume from Wall Street and CME positions now significantly influences the asset’s trajectory alongside crypto-native activities.
Although Bitcoin remains a decentralized monetary system with a core consensus independent of these frameworks, the pathways through which most investors gain exposure have fundamentally evolved.
Currently, BTC ETFs command a substantial portion of the supply, affect marginal demand, and anchor the largest pool of regulated liquidity the asset has ever experienced.
Consequently, they have enabled institutions not just to participate, but increasingly to dominate the market structure of the foremost digital asset.
