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Bloomberg’s James Seyffart: Why Trillions in Advisor Wealth Could Flow Into Bitcoin — Transcript

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0:00We welcome our next guest to the show,
0:01James Safford, senior ETF analyst at
0:04Bloomberg. Hey, James.
0:06>> Hey guys, thanks for having me.
0:07>> Yes, thank you. So, we just laid out the
0:10numbers there. USB spot Bitcoin ETF
0:12seeing nearly 1 billion of net inflows
0:14in a single day on Monday. What does
0:16that level of demand tell you about
0:17where we are in the Bitcoin market right
0:19now?
0:20>> Yeah, things have definitely turned a
0:21quarter. And it's not just that one day.
0:23Like, if you go back two days prior,
0:25I'll just read them out to you. we're
0:26looking at 160 433 9.99 was so just shy
0:30of that 1 billion number and then
0:31yesterday was 715. Um so you go back you
0:34know just 3 months ago and those numbers
0:36were inverse we were seeing those types
0:37of outflows. Um, so this is just kind of
0:40when I look back at like any sort of ETF
0:42category, whether it's a digital asset
0:44like Bitcoin or, you know, some other
0:46individual ETF category, like the what
0:49you tend to see is things what you want
0:51to see is, you know, that line of assets
0:53and flows going up into the right, but
0:54you're going to see pullbacks. Like
0:56there are times where people are going
0:57to take profits. They're going to do
0:58those types of things. And this is just
0:59healthy. So right now, we we've come out
1:01of a pretty bad tough area in June and
1:03July where we're seeing tons of outflows
1:05and this is coming back. and it's coming
1:07back in a big way.
1:08>> Now, I'd love your confirmation here.
1:10The data I'm looking at suggests that,
1:12you know, the average holders cost basis
1:14of these ETFs is around an $82,000
1:16Bitcoin. You know, and now we're
1:18rallying sharply up above that break
1:21even point where these investors are
1:22largely in the green. You know, how
1:25important is that level to ETF holders?
1:27and and you know, does the fact that you
1:29know, the average ETF investor is now
1:31back in profit tell you anything about
1:33the behavior we've seen over the past
1:35couple days or the psychology behind
1:36these investors?
1:38>> Yeah. So, I mean, I could I could answer
1:40I could talk about this for like 10
1:41minutes, so you have to cut me off if I
1:42go too long, but but the real answer is
1:44like for Yeah. From like a technical
1:46perspective, I mean, this is the average
1:47cost basis. So, one, it's like it's a
1:49resistance level, right? Like people who
1:51bought in and that was their average
1:52cost basis and they were sitting, you
1:53know, 20% below uh below their cost
1:55basis. they were like, "Okay, now I'm in
1:57profit. I might as well just take it and
1:59just move on with my life. I I'm no
2:00longer at loss." Um, so it's one, it's
2:02it's smashed through that resistance
2:04level. It's probably going to chop
2:04sideways as people make that decision
2:06whether or not to allocate or, you know,
2:08take their profits as they've made them.
2:10Um, but the other side of it is like
2:11when you look at the data, um, it
2:14generally people have been buying. I
2:15mean, like I said, we saw some outflows,
2:17but from from these when these things
2:18launched in January 24 until now until
2:21the peak of in October 10, 2025, there
2:24was $64 billion that came into these
2:26things. That that's absolute smashing
2:28success. We thought they were going to
2:29be success. They knocked any of our
2:30predictions out of the water. They
2:32knocked pretty much anyone's predictions
2:33out of the water. Um, and but now, so
2:35they they pulled back a little bit to
2:36like 53. We're now at 56 57. So, we're
2:39just $6 billion away from that all-time
2:41high water mark of money coming into
2:42these things. Um so really at the end of
2:45the day for the most part people have
2:46been allocating when you look at a lot
2:47of those outflows. We can see what
2:49institutions were buying these. We don't
2:51know what retail was doing. So 70 75% of
2:54the holders of these things are retail.
2:55From an institution's perspective,
2:56advisors have been allocating in the
2:59only time they were net sellers was in
3:00the first quarter. They were buying in
3:02the second quarter. They're likely
3:03buying now. Um it's hedge funds that
3:04were selling earlier this year mostly.
3:07And you know, do you think getting back
3:09above this level? You know, you you said
3:11we might chop sideways, maybe some
3:12people are going to take money off the
3:13table are going to have time to decide.
3:15Is there any possibility for a feedback
3:17loop to the upside where where maybe
3:19holders who were previously underwater
3:20become less likely to sell? Is that
3:22something that you ever see with these
3:23ETFs getting kind of back up to that
3:25water line?
3:26>> I mean, what I would say is a lot of the
3:28the main users of ETFs, and the same is
3:30true for these ETFs, is is advisers.
3:33Advisers, long-term allocators tend
3:35retail investors tend to be the same
3:36way. and what we've seen that if you
3:37told me an asset pulled back 50% and
3:39they only lost 12 13% of the money that
3:41went in I would have said that's a damn
3:43strong situation. So basically at the
3:45end of the day these people haven't
3:46really been selling. Um obviously like I
3:48said in June July there was selling but
3:50like from like a whole perspective a
3:53high level perspective they've been
3:54buyers or at least holding on and I and
3:56that doesn't seem to be changing and
3:57people seem to be piling in. Um, so the
3:59the people who want an allocation here,
4:01whether it's two, three, five, 10% of
4:03their portfolio, um, they're still
4:05making those allocations and we're still
4:07very early in that process of people
4:09deciding whether or not they want an
4:10allocation or not.
4:12>> If we see these strong inflows levels
4:15repeated through the next bull market,
4:17how much can ETF flows realistically
4:19contribute to Bitcoin's next major price
4:21move? Is there a way to translate the
4:23certain level of net ETF inflow into a
4:26rough scale of price impact?
4:28It's it's really hard. I mean, part of
4:30the problem is like anything, these are
4:32just a small piece of the pie. Um, I had
4:34dealt with this a lot talking with
4:36people on X and Twitter, retail
4:38investors. They thought that like just
4:39an ETF and taking in money was going to
4:41send the the price skyrocketing. Like I
4:43said, for the first half of this year
4:45until June and July, the ETFs were
4:47mostly net buyers. There were some
4:48selling, but like it the real cause of
4:50the sell-off was, you know, the actual
4:52primary Bitcoin market, right? the ETF
4:54holders, the boomers if you will, most
4:56likely in their portfolios were not the
4:58sellers here. So just because they're
5:00buying doesn't mean that's happening.
5:01It's only they only have a small piece
5:02of the pie. It's a big piece now. I mean
5:04we're talking hundred billion dollars in
5:06these things. Um but it's again that's
5:09nothing compared to, you know, almost $2
5:11trillion in valuation of Bitcoin and the
5:13broader asset class. So when you when
5:15you look at this, yes, they can be
5:17impactful. Yes, the flows can move the
5:18price. Um but they tend to be more
5:20follow on. And when you get those flow
5:22numbers, people like to think they're
5:23predictive of something, but when we see
5:25the flow numbers, the buying has already
5:26happened. Like in many cases for some of
5:28these ETFs, particularly Black Rockcks
5:30IBIT, like when the buying comes in, we
5:32don't see the flows for 18 to 24 hours
5:35after it's already happened. So it's
5:36more it we're looking back at what's
5:37going on. So it's more coincident with
5:39the price than any sort of indication of
5:41what's going to happen going forward.
5:43You know, you brought up last year
5:45record volumes, a lot of records set for
5:47these ETFs, especially IBIT throughout
5:50this entire course except for maybe Q1.
5:52Everyone's just been a net buyer, just
5:54smashing by, smashing by on these ETFs.
5:56Now that we're back above this 82K
5:59level, you know, are there people who
6:01might have not been joining that buying
6:02frenzy, who who might have been, you
6:04know, waiting or skeptical or looking
6:07that might be changing their mind or
6:08changing their tune or their thesis now
6:09that we've kind of gotten back to this
6:11key level. Um and and you know over the
6:13next cycle are are do are you expecting
6:16the net buying inflows to come from just
6:18an accelerant of the same marginal buyer
6:21or do you expect new buyers to be
6:22entering the market alongside them?
6:25>> Uh the answer to that first that last
6:27part is both like it's going to be net
6:28new buyers and people allocating. Um
6:31going back to like what I said a lot of
6:32the people that use ETFs they tend to
6:34have target allocations to things. So
6:35they might have a target allocation
6:37sleeve to something like Bitcoin of 2%
6:39or 5% in the client portfolio. And I
6:41would have expected more buying. I think
6:42that's probably part of the reason why
6:44we didn't see as big of net outflows
6:45because people had like target
6:47allocations as the price went down. So,
6:49but got cut in half from 50%. If your
6:50target allocation is 2% and you were
6:52there when Bitcoin was over 120 goes
6:54down below 70, all of a sudden you're
6:56going to have to buy to keep that that
6:58sort of same sort of allocation at 2% or
7:005% what have you. The same thing is
7:02going to happen. There could be some net
7:03sellers as this thing rises. So, they
7:05could actually be a slight pullback, but
7:06for the most part ETFs, the flows tend
7:08to come in as the price is going up. But
7:10I think I was kind of surprised that we
7:12didn't see more net inflows in the
7:13pullback. And through talking with
7:15advisers and a lot of different clients,
7:16they were like, "We don't need to jump
7:17in right now. Um, we're going to wait
7:19till, you know, whatever this bare
7:21market is over and then we'll talk about
7:22allocating for our clients. We don't
7:24need to catch the, you know, absolute
7:25bottom. We're fine to wait until like a
7:28lot of this chop solidation happens."
7:30Um, so I think one, there's a lot of
7:31people that were thinking they wanted to
7:32put it as an allocation and when it
7:34started going down, they're like, I'm
7:35not going to try to catch a falling
7:36knife right now. Um, so this could bring
7:38in more people who have decided, you
7:40know, maybe a year ago or doing their
7:42due diligence that they wanted to get
7:43exposure and they they didn't yet. Uh,
7:45the other part of it is like a lot of
7:46these platforms, so wirehouses, these
7:48where these advisers work, there's rules
7:50and regulations about what they can and
7:51cannot buy. Just because an ETF is out
7:53there doesn't mean that you can just buy
7:55it for your clients wholesale. A lot of
7:57places are still in this middle ground.
7:58For a while, everything was like red.
8:00Basically, I view it in three different
8:02categories, right? On on one category,
8:04you cannot buy it under any
8:05circumstance. In the middle category,
8:07there's all these different rules and
8:08regulations about like you need to have
8:09a certain level of assets, a certain
8:10number of risk tolerance, um all these
8:13different willingness and ability to
8:14take risk and or the client has to
8:17specifically ask you to buy an asset and
8:19then you can go through a process and
8:20buy it for them. The other side is like
8:22you can just buy it for them when you
8:23want to if you think it fits in their
8:25client portfolio. A lot of places are
8:27still in that middle ground. They're not
8:28in that, you know, you can just buy it,
8:29but more people are going to that final
8:31ground where you can just buy it for
8:32them if you want. So we're still in this
8:34like process of like making it okay for
8:37advisers and uh brokers to like pitch
8:39these things to their end clients. Um so
8:41a lot of that has changed over the last
8:43year. A lot more institutions have
8:44gotten comfortable um with these
8:46products and how they operate. So I
8:47think as that has you know gotten
8:49cleared through and gotten the okay for
8:51a lot of these big you know big banks,
8:53think Morgan Stanley, JP Morgan um then
8:56you can get some some more buying. some
8:58of these people that might have wanted
8:59to buy it for their clients but
9:00literally could not and then decided
9:02just to wait um could be coming into the
9:04market again in the coming months.
9:05>> Well, going off that, one thing that's
9:07difficult for investors to see is who is
9:09actually buying and selling. So, when
9:11Bitcoin has these sharp draw downs, how
9:13much of that selling do you think is
9:15coming from the ETF holders versus
9:17people holding spot Bitcoin directly?
9:19And what's that tell you about the
9:21difference between institutional
9:23investors behavior versus the longtime
9:25holders? Yeah, I mean the short answer
9:27is the call is coming from inside the
9:28house. It's from the spot holders. I
9:30mean if you just look at what happened
9:31with um ETF flows, yes, there was
9:33billions of outflows, but for the most
9:35part they were net buyers are mostly
9:37flat when so for the amount of selloff
9:39that we saw it was the OGs, the whales,
9:41what have you uh that were actually
9:43selling these things. Um I kind of
9:45talked about this a little bit before,
9:46but like we have quarterly 13F reports
9:48and ETFs are required to be reported on
9:50there for institutions. um we only know
9:5325 27% of the holders of the ETFs on a
9:56given quarter right now. That means 70
9:59plus 75% of the holders are retail. So
10:01we don't actually know who's holding
10:02these ETFs. It's it's either retail
10:04people in their brokerage accounts or
10:05people who aren't large enough that are
10:07required to file 13Fs. Um but when we
10:09look at those 13F filings, most of the
10:12selling is from hedge funds. And when
10:14when so then now we're going to go down
10:15a bit of a rabbit hole, but hedge funds
10:16use these things for something called
10:17the basis trade. So the basis trade is
10:19where you go long the spot asset and
10:21sell forward the futures and there's
10:23like a little bit of a a almost risked
10:26free return. It's it's an arbitrage that
10:27they can generate yield from. Um so the
10:30annualized return going back into late
10:32into 2025 or even going back into early
10:3525 was like double digits. We're talking
10:3710 15% and hedge funds love this. They
10:39lever up. They enter into the basis
10:41trade. They're going long the spot ETF
10:42but it's not necessarily going to be
10:44driving up Bitcoin price because they're
10:45also shorting the futures market, right?
10:47um that weight that trade has completely
10:49unwound mostly from from you know we'll
10:51call it October of last year through
10:53now. So like hedge funds have been part
10:55of the biggest sellers in these ETFs and
10:58just in the market in general. So um as
11:00that has unwound that there's like just
11:02not a lot of selling left from that side
11:04of the thing side of the market for
11:06ETFs. Um so yeah, who's selling who's
11:08buying? It's definitely the OGs. It was
11:10a lot of these hedge funds trader types.
11:12Uh and theoretically if we start seeing
11:14you know that basis trade right now it's
11:15around five to six percent depending on
11:17what you're looking at maybe a little
11:18higher as that perks up and stays higher
11:20we'll likely see more inflows that some
11:22of these flows could be hedge funds
11:23jumping back into that trade.
11:25>> Now James we recently had your colleague
11:27Eric Balchunis on the show we had the
11:30pleasure of having him and he speculated
11:32that you know eventually Bitcoin ETFs
11:35will surpass gold ETFs and total assets
11:37under management. you know, given how
11:39how quickly and explosively these
11:41Bitcoin ETFs have have grown, you know,
11:44what still needs to happen for that to
11:46become a reality? How close do we think
11:48we are to some sort of inflection point
11:50where we can see that gap up and catch
11:52the gold ETFs?
11:54>> Yeah. So, um, we wrote we actually wrote
11:56a book together and one of the hot
11:57topics is this exact thing. We view them
11:59as more gold and Bitcoin as more
12:01complimentary in a portfolio than
12:02supplementary as I I know a lot of other
12:04people would argue. Um, but if if you
12:06look at the AUM, we're looking at
12:08Bitcoin ETFs around 110. Um, and gold
12:11ETFs around 265. Um, so there's a pretty
12:14big gap there for that before that
12:16happens. But one of the reasons we think
12:17it's going to happen is because gold
12:18isn't um we we we like to talk about the
12:22things as hot sauce in a portfolio.
12:23Bitcoin is a lot more volatile. People
12:25are going to trade it. Um, obviously
12:27people are buying it for the currency
12:28debasement side of things as well, which
12:30is obviously what people are using
12:32Bitcoin for, portfolio diversifier. but
12:34it also has, you know, that huge upside
12:36volatility perspective, heavy trading
12:38that, uh, gold just doesn't seem to
12:40have. Um, so that's why we think it
12:42could surpass it, but it's going to take
12:44years almost certainly uh absent like an
12:46absurd uh run in price that happens for
12:48Bitcoin and not for for gold.
12:50>> We had a milkshake on this reference on
12:53this show. Now you're talking about hot
12:54sauce and I am getting really hungry,
12:56James. Um, but from where you sit at
12:59Bloomberg Intelligence, what Bitcoin
13:01data points do you watch that you think
13:03most investors are ignoring?
13:09>> Most I don't think honestly I don't
13:11watch anything that most investors are
13:12ignoring. Uh, I try to look at the
13:13technicals particularly for this asset
13:15and one of those is the cost basis. Uh,
13:17I don't think anybody was talking about
13:18it for a while. Uh, and obviously it's
13:21kind of come up again and people are
13:22starting to pay attention to it
13:23obviously because they view it as a
13:24resistant level just like they're
13:25looking at the moving average or the 200
13:27day moving average. And I'm constantly
13:29writing and looking about what's going
13:30on with cumulative flows, who the
13:32holders are, who's buying, who's
13:33selling. Um, and I think most people I I
13:36mean based on the amount of people that
13:37reach out to me for questions and
13:38comments on exactly who is doing this, I
13:40think most people are kind of paying
13:41attention to it as well. Um, but I guess
13:43if I had to say one thing that people
13:44aren't paying attention to, it's just
13:45that uh that side of things where I was
13:48there's there's 30 $40 trillion in
13:50advisor wealth and the vast vast
13:52majority of it either has an allocator
13:54or is not planning to allocate but there
13:56is even if a small portion of them
13:58decide to allocate it could be big but
14:00kind of people make the same sorts of
14:02arguments here uh around other asset
14:04classes that you can make the same
14:05arguments about gold people are very
14:06heavily underallocated to gold
14:07theoretically in a portfolio but a lot
14:09of people just don't believe in it just
14:10like a lot of people aren't ever going
14:11to belief in bitcoin for a portfolio
14:13diversifier despite what the data says
14:15about how uh it improves your uh risk
14:18adjusted returns and different things.
14:20Now, you know, you mentioned you look at
14:22a lot of the technicals of the
14:23underlying. In your estimation, you
14:26know, as this ETF complex continues to
14:29grow, as global Bitcoin adoption, uh,
14:32underpinning this complex continues to
14:34grow, do you think that there's any, you
14:38know, potential ceiling for this cycle?
14:40Uh, do you think there's a floor for
14:41this cycle? you know, how how expansive
14:44growth do you think is is um you know,
14:47possible for this cycle given kind of
14:49the the macro turmoil? Do you think
14:51we're going to have uh a cycle adjusted
14:53to the upside? Do you think we might
14:55have a dampened cycle or or do you have
14:57any thoughts about where we might be
14:58looking over the next three or so years?
15:01>> Yeah. So, my view has been a sort of
15:03dampened cycle like I was never I wasn't
15:05really I thought I kind of thought the
15:06four-year cycle was going to be over a
15:08little bit. Um but I was kind of wrong
15:10there. I mean not fully. My overall view
15:13was like we we never saw the explosive
15:14upside. So we shouldn't see the 80%
15:16pullback which so far we granted we
15:19haven't but as you kind of hinted with
15:20the macro outlook um no matter what you
15:22or I or anyone views if they think this
15:24thing is a hedge against currency based
15:26in a safe haven asset the market for the
15:28most part views it as a risk asset. So
15:31if we have a a lot of things happening
15:33in the macro environment risk assets get
15:35sold off it's I I think it's unlikely
15:37that Bitcoin is going to be able to
15:38weather that storm. Now, as you
15:39highlighted before I even came on, like
15:41it's kind of more correlated to gold
15:42right now. It is acting a bit more like
15:44a safe haven asset against currency
15:46debasement and things like that. But in
15:47a true risk selloff, uh this thing won't
15:50be able to sidestep it. Um so my overall
15:52view is one thing I will say that I kind
15:54of changed my mind on is I kind of
15:56thought that the massive explosive
15:58upsides weren't going to be able to
15:59happen anymore because the asset class
16:00has grown so much in size. But looking
16:02at what happened with gold last year and
16:04that is a multiple of the size of
16:05Bitcoin and we saw it more than double.
16:08Um, I would say that I theoretically I
16:10don't know why that couldn't happen. Um,
16:12so I I guess like the I had a more in my
16:14mind a more capped upside than I do now.
16:17Um, but again I just think the the days
16:19of you know what we saw in 2017 and 2020
16:22are are likely behind us because the
16:23asset has gotten larger, but I don't
16:25know uh what that cap actually looks
16:27like.
16:28>> James, this has been so awesome. Thanks
16:30for joining us.
16:32>> Thanks for having me. This was fun.

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