Why Bitcoin self-custody is declining in the ETF era

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 didnt 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 Vanguards VOO.

Expanding institutional adoption

Bitcoin ETFs arent 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.