David Edwards
The approval of Bitcoin spot ETFs in January 2024 marked a watershed moment in cryptocurrency history. Yet as these regulated, institutionally-managed investment vehicles flourish, they are also accelerating a fundamental shift—away from the self-custody principles that once defined Bitcoin’s ideological foundation.
Self-Custody in Decline
According to on-chain data, Bitcoin self-custody has been steadily decreasing since early 2024. Concurrently, the number of new Bitcoin addresses has slowed, and active wallet addresses dropped from nearly 1 million in January to approximately 650,000 by late June 2025—levels last seen in 2019.
“Since spot ETFs became available, the growth rate of self-custody users has been in decline,” noted on-chain analyst Willy Woo on X.
This trend signals a behavioral realignment: investors are increasingly choosing institutional custody over managing private keys and cold wallets.
The Institutionalization of Bitcoin Access
The rise of ETFs offered a simplified, compliant pathway for traditional investors. Spot Bitcoin ETFs, introduced by asset management giants like BlackRock (IBIT), Fidelity (FBTC), and Grayscale, allow exposure to Bitcoin through regulated financial products—without the friction of direct ownership.
Among them, BlackRock’s IBIT ETF has emerged as the dominant force, amassing over $83 billion in AUM by July 18, 2025. It holds more than 700,000 BTC, surpassing Fidelity’s FBTC by nearly 100,000 BTC. IBIT also set a record for the fastest ETF in history to reach $80 billion, achieving the feat in just 374 trading days, far ahead of Vanguard’s VOO, which took 1,814 days.
“ETFs didn’t steal users from cold storage. They opened the market to those who were locked behind compliance walls,” noted one crypto commentator on X.
The Institutional Network Effect
Beyond ETFs, the broader institutional embrace of Bitcoin has intensified. By mid-2025, over 250 organizations—including public companies, private firms, pension funds, and ETFs—held Bitcoin on their balance sheets. The number of public companies with Bitcoin exposure rose to 125 by Q2 2025, up 58% quarter-over-quarter.
These Bitcoin treasury strategies provide an indirect exposure mechanism that removes the complexities of crypto storage and security. For many investors, the appeal lies in the combination of regulatory clarity, secure custody, and financial compliance—benefits that traditional self-custody models cannot easily match.
The Ideological Trade-Off
The growth of institutional Bitcoin products presents a paradox. While they increase capital inflows, accessibility, and mainstream adoption, they also diverge from Bitcoin’s original ethos—a peer-to-peer, decentralized currency free from centralized control.
What once defined crypto as a movement—self-sovereignty, control of one’s keys, and decentralized finance—is now giving way to convenience, regulatory alignment, and traditional financial infrastructure.
