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ETF investors have shown surprising resilience during the recent Bitcoin selloff, managing to withstand the shifts better than some anticipated. In a recent interview with CoinDesk, Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, pointed out various key statistics that illustrate this stability.

• Bitcoin’s value has plunged more than 40% from its recent peak, causing considerable turbulence in the traditionally retail-centric crypto market.
• Despite this downturn, only 6.6% of assets in Bitcoin ETFs have been withdrawn during the same timeframe.
• Balchunas emphasized, “So far, the ETF boom has been really successful.”

Reasons Why ETF Holders Should Own

Balchunas makes a case that ETF investors differ fundamentally from those who trade cryptocurrencies directly.

• For many, Bitcoin serves as a small portion, around 1% to 2%, of their overall investment strategy, which usually includes stocks and bonds, rather than being a primary focus.
• A diversified portfolio allows these investors to weather the storm better, reducing the emotional impact of losses in the crypto market.
• Balchunas also noted that ETF investors “tend to hold very strong assets,” as they have navigated through various market cycles with more traditional investments.

Contrast with Crypto Natives

Even the same downturn can be perceived in vastly different ways depending on an investor’s exposure level.

• In Balchunas’s view, crypto-focused investors might be experiencing what he calls “existential crisis mode.”
• Those using leverage and long-term holders may be putting more selling pressure on the market than ETF investors face.
• “Volatility is the cost of return,” he explained, noting that Bitcoin has historically gone through seven or eight significant downturns.

Lessons from Gold ETFs

Balchunas draws parallels between Bitcoin and gold when considering their roles within ETFs.

• A decade ago, gold ETFs saw a 40% dip in six months, resulting in a loss of about a third of their assets during that period.
• However, the gold ETF later restructured and now holds around $160 billion in assets.
• Before the latest selloff, Bitcoin ETFs had briefly been comparable in size to gold ETFs, indicating how investment flows can fluctuate over time.

What Happens Next

Although ongoing volatility seems likely, ETFs might help solidify Bitcoin’s presence in mainstream finance.

• Looking at Bitcoin’s 17-year history, Balchunas noted that it has repeatedly bounced back to new highs following substantial declines.
• Thanks to ETF structures, Bitcoin is now positioned alongside stocks, bonds, and commodities in typical investment portfolios.
• “A decline does not mean the end,” he remarked. “It just means sales.”