Why Bitcoin self-custody is declining in the ETF era – Crypto News

Bitcoin exchange-traded funds (ETFs) and other institutional Bitcoin products may be reshaping a core crypto ethos rooted in Satoshi Nakamoto’s original vision. According to onchain data, Bitcoin self-custody has been steadily declining since January 2024 — the same month Bitcoin spot ETFs were approved.

After nearly 15 years of growth, the creation of new Bitcoin (BTC) addresses is slowing down, while active addresses have dropped sharply from nearly 1 million in January 2024 to around 650,000 in late June, reaching levels not seen since 2019.

“Since spot ETFs became available the growth rate of self-custody users has been in decline,” said on X analyst Willy Woo.

The data signals a major behavioral shift as more investors opt for institutional custody solutions like ETFs instead of managing private 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.

“ETFs didn’t steal users from cold storage… They opened the market to those who were locked behind compliance walls,” a community member wrote on X.

The rise and convenience of Bitcoin ETFs

The launch of spot Bitcoin ETFs by companies like BlackRock, Fidelity and Grayscale marked a turning point for Bitcoin.

The ETFs gave investors regulated, institution-grade access to the cryptocurrency, without the need to manage wallets, exchanges or private keys. The funds also offered tax advantages and promised secure custody, along with the ease of traditional brokerage platforms. 

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.

Related: Metaplanet vs. Semler Scientific: The race to become Bitcoin’s biggest corporate whale

Expanding institutional adoption

Bitcoin 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 Strategy 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 offer holders an indirect way to invest in Bitcoin without managing private keys or dealing with crypto exchanges. Like ETFs, they eliminate the need for self-custody or direct interaction with crypto exchanges, while providing regulatory oversight and institutional-grade custody.

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