Institutional Ownership May Reduce Market Volatility
Bitcoin has struggled around $80,000 as ETF demand fluctuates and rising oil prices complicate the outlook for interest rates. According to BloFin CEO Matt Hu, the cryptocurrency's future downturns could become less severe due to structural changes in who owns Bitcoin.
Hu attributes this potential shift to ETFs and corporate treasuries bringing investors with longer investment horizons. He noted that despite headlines about daily ETF inflows and outflows, the total amount of Bitcoin held by these funds remained broadly stable through recent bear market conditions.
BloFin's research estimated that US spot ETFs held roughly 1.3 million BTC, unchanged since January. The firm's analysis found that Bitcoin's latest bear-market decline reached 53%, compared with crashes of approximately 77–85% in previous cycles, assuming June remains the market bottom.
The Current Test
Recent price action has challenged this thesis. Bitcoin slipped below $80,000, and US spot Bitcoin ETFs recorded $635.6 million in net outflows on October 22. Glassnode estimates that ETF investors have average acquisition costs near $81,500 and Bitcoin treasury companies near $80,200, potentially putting both groups at a loss if weakness persists.
Hu identified specific conditions that would invalidate the outlook: a sustained decline in ETF Bitcoin holdings, widespread forced selling by Bitcoin treasury companies, and a shrinking long-term holder base as measured by on-chain metrics.
Longer-Term Rally Drivers
Government debt could eventually become a powerful catalyst for Bitcoin, according to Hu. However, current conditions work against this possibility. Higher bond yields make bonds attractive and draw capital away from Bitcoin. The US 10-year Treasury yield ended October 23 near 5%, while higher energy costs threaten to keep inflation elevated.
Hu believes rising government debt could eventually change that relationship. As government borrowing costs continue to climb, fiscal sustainability may become a priority, potentially leading to financial repression in which central banks keep borrowing costs artificially low. Bitcoin could benefit if investors increasingly seek assets with limited supply to preserve purchasing power.
Coinbase estimates that ETFs attracted approximately $6.4 billion in net Bitcoin investment since August, compared with $1.5 billion purchased by corporate treasuries.
Altcoins Face Structural Headwinds
Hu expressed skepticism about whether traditional altcoin rallies will return. In earlier cycles, Bitcoin advances often encouraged investors to move into smaller, riskier cryptocurrencies. Now, tokenized stocks and other real-world assets offer alternatives that could compete for the same speculative capital.
CoinGecko's third-quarter report showed spot trading volumes falling 14.2%, while perpetual futures open interest increased 40.6%, suggesting leverage has grown faster than underlying trading activity. Hu believes future investment opportunities will increasingly favor tokens supported by genuine economic activity and mechanisms that return value to holders.
