Don’t Blame ETFs for Crypto’s Massive Volatility Spikes

There are two types of people in this world: traditional finance investors and DeFi cryptoheads, and they don’t always see eye to eye.

Bitcoin is down roughly 25% year-to-date, fueling frustration in the crypto market. Some crypto purists blame exchange-traded funds, arguing they go against crypto’s decentralized spirit, shift focus to institutional players and introduce volatility. In February, investors pulled a record $3.3 billion from US spot-Bitcoin ETFs, Bloomberg reports, and critics argue those types of flows can exacerbate price changes more than retail trading. TradFi experts, however, say that’s a bunch of bologna and that without fund issuers and market makers, crypto likely wouldn’t be where it is today.

“If you have a lot of crypto in your account, you should be getting on your knees every morning and saying a nice thank-you prayer to [BlackRock CEO] Larry Fink and the rest of the ETF people,” said Eric Balchunas, Bloomberg Intelligence senior ETF analyst, adding that ETFs have created a bridge for crypto to the regular world of finance. “The boomers, who have all the money, by the way, are starting to get invested,” he told a crowd of crypto industry folks at the Digital Asset Summit in New York City last week. “The wealth managers who control $50 trillion in the US, they trust ETFs.” 

X Marks the Spot ETF

Crypto remains a relatively small asset class, with a global market cap of roughly $2.4 trillion, smaller than single companies like Nvidia or Apple, according to CoinGecko. Yet, ETFs have been major drivers of inflows and adoption:

• BlackRock’s iShares Bitcoin Trust ETF (IBIT), launched in January 2024, has $54 billion in AUM and has become one of the most successful fund launches of all time.
• Advisor adoption is rising, too. About one-third of advisors invested in crypto for client accounts in 2025, up from 22% in 2024, and over half reported holding crypto personally. Crypto equity ETFs are expected to be advisors’ preference for crypto exposure in 2026.

“What’s happening is just a professionalization of the way in which investors are using crypto assets, and the development of that market infrastructure,” said Russell Barlow, CEO of 21Shares.

Be Realistic. ETFs are often used as a scapegoat, with detractors either saying they hurt market prices or artificially inflate them, said Will Peck, head of digital assets at WisdomTree. “It reflects a fundamental misunderstanding of how these ETFs work and the nature of the arbitrage mechanism,” he said. 

Balchunas also reminded investors to moderate expectations. Not every year will mirror Bitcoin’s 2024 surge of over 120%. “You should hang out with a bond investor,” he said. “They’re happy with 4% a year.”