Inside The Passive Bid, ETF Machine

This week I had a conversation with my friend Eric Balchunas, Bloomberg’s leading ETF analyst, focused on the evolving structure of modern markets, the role of crypto ETFs, and the durability of passive investing.

We began with his recent comments on crypto ETFs, where he described the current phase as more about stability than growth. When I asked whether momentum had faded in crypto ETFs, he replied plainly, “There’s not momentum. I would say right now, it’s like holding the line.” He explained that many investors entered at elevated prices and are now sitting on losses, creating fatigue and limiting new demand.

This environment, he suggested, makes it difficult for crypto ETFs to repeat their earlier explosive growth.

Eric placed this slowdown in the context of what he called an unprecedented launch period. The first eighteen months of spot Bitcoin ETFs, in his view, broke nearly every record in the industry. Institutional involvement after the FTX collapse, especially from major firms, played a decisive role in restoring confidence. He argued that without ETFs, Bitcoin’s recovery would have been far weaker, and that traditional finance effectively rebuilt the market’s foundation.

He also described how Bitcoin had likely moved too far ahead of fundamentals by rapidly pricing in political shifts, inflation expectations, and institutional adoption. He compared it to an asset that reacts instantly to narratives, often before they are fully realized. At the same time, early adopters began quietly reducing their exposure. Eric characterized this process as a “silent IPO,” where long-term holders used new liquidity to take profits without a formal public offering.

Despite recent declines, he emphasized that ETF investors have remained unusually disciplined. Outflows have been noticeable but limited. “Ninety-four percent of the assets or investors are hanging tough,” he noted, pointing out that most ETF holders are still committed. Because advisors usually frame crypto as a small portfolio allocation, investors are less likely to panic than those whose entire net worth is tied to digital assets.

When we turned to Bitcoin’s broader role as an asset, I shared my own cautious stance. Eric described his evolution from skepticism to conditional respect after studying the...(WATCH OUR FULL INTERVIEW AND DISCUSSION HERE).

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