Podcast: Forward Guidance

Broadcast Date: February 25, 2026

Guest: James Seyffart

Compiled by: BitpushNews

Guest Introduction

James Seyffart is a Senior Research Analyst at Bloomberg, who has been closely tracking the global ETF market and cryptocurrency ETFs, and is regarded as one of the analysts most knowledgeable about ETF fund flows and product structures. He continues to study how institutional funds get into the cryptocurrency market, how ETF products evolve, and the integration trends between traditional finance and blockchain.

Market Sentiment Split: Retail vs. Institutional

Host:

Let's start by talking about market sentiment. Recently, there's been a strange phenomenon where those who have been in the crypto space for a long time feel like "it's all over, it's terrible." But when you speak to established traditional financial institutions (TradFi) that are preparing to enter the market, they say "no, there are still many opportunities here," and they are very optimistic. This creates a strange divergence: on one hand, prices are collapsing, while on the other, those institutions we've been urging to enter the market seem to finally be starting to invest seriously in this space. What do you think about this?

James:

You’ve raised an excellent question. First, if you look at the current market discussion atmosphere and the sentiment of long-term holders, and compare it to what I hear when talking to ETF issuers and institutional investors, it's like two different worlds. Stablecoins, tokenization: their views on all these underlying assets remain very optimistic. This strange divergence has lasted for more than a year. Prices are falling, but those traditional institutions we've said need to come in are finally starting to invest seriously and deploy resources in this space. The only question is, we don’t know which protocols will ultimately benefit or how much they can benefit.

Host:

The contrast in sentiment is interesting. But we also see that while institutions verbally express optimism, their actual actions, such as participating in Basis Trading (arbitrage trading) which is Delta neutral, or issuing their own stablecoins to earn fees, do not directly bring value appreciation to those tokens being issued. How do you see this "disconnect" between words and actions?

James:

I completely agree with your view; this contrast indeed makes it difficult to understand. But beneath the surface, a lot of things are happening. Many institutions are participating very deeply. Look at Robinhood, Fidelity, BlackRock: they are actually building on these public chains and doing asset tokenization.

Many so-called "fake tokenization" is happening, but there is also much that is genuine. Inside these institutions, there have always been small teams focused on this area, testing, and they are now expanding these teams. For instance, Frank Chaparro often mentions on Twitter that the new job postings he sees from the companies I just mentioned are all about creating vaults and various different things.

So, I believe we are still in a very early stage. It’s hard to know exactly how all this will ultimately take shape. Some networks, many institutions still prefer to use private blockchains. I’m even hesitant to call them blockchains, because the essence of a blockchain should be public and decentralized.

I remain optimistic that some of these things will ultimately succeed. I believe humans always tend to overestimate what will happen in the next 12 to 18 months, while underestimating what will happen in the next 5 to 10 years. That’s the current situation. It takes time, especially for these highly regulated financial institutions—it’s impossible for them to do this overnight.

For example, Schwab is about to launch cryptocurrency trading directly on their platform. All of this is happening. Additionally, those advisor networks, which are exactly who holds these ETFs, are still gradually coming online. I discussed with you two years ago that ultimately these advisor networks and brokerage platforms will allow their clients to invest in these ETFs. As of now, I’m still hearing news that certain platforms have just allowed these products. There are still many platforms where you cannot easily purchase certain ETFs. So, we have a long way to go before true widespread adoption.

Explosive Growth of ETF Products, But a Wave of Elimination Will Come

Host:

It seems like the number of ETF issuances is still surging.

James:

Yes, and there are so many that I can barely keep up. There are currently around 160–170 ETF applications or products related to:

• Leveraged ETFs

• Income ETFs (covered call)

• Derivative structures

• Various token-specific ETFs

I wrote in my year-end outlook last December:
In the coming year, there will be hundreds of crypto ETFs launched.

But I also believe:

• Many products will be liquidated within 12–18 months

• Assets with lower market capitalizations will struggle to support multiple ETFs

• Issuers are using a "scattergun" strategy to test the market

This model is essentially the industry's "spaghetti cannon"—throwing products at the market to see what can stick.

Host:

Is this "first move then eliminate" model common in the ETF industry?

James:

It has become increasingly common over the past few years. Changes in regulatory rules have made ETF issuance: cheaper, faster, and easier, which means issuers can launch products and wait for market demand. If a particular asset suddenly becomes hot, and you happen to be the only issuer of an ETF for it, then even if no one cared for the previous 12 months, you might suddenly attract hundreds of millions in funds and turn a profit.

Of course, different institutions have very different strategies. For example:

• BlackRock: only does BTC and ETH, extremely restrained

• Other issuers: want to issue just about anything

So moving forward, we will see a large number of products coming online, but also a large number disappearing.

Is AI Taking Away Funds?

Host:

Over the past decade, cryptocurrencies have essentially been the "darling" of speculative capital. But now there's a narrative that AI has completely taken over that position and is far ahead in attracting speculative capital. Can you see this from the data? Whether from the retail level or institutions are running to invest in leaders like CoreWeave, while withdrawing from products like IBIT?

James:

To be honest, I haven’t seen a particularly obvious correlation from the data. But I completely agree with your assessment; AI is currently the focal point of speculative capital. You don’t even need to look at price data—just see what the media is discussing and what is trending on social media, and it becomes clear. What you mentioned is a fact.

But I want to point out that while these Crypto ETFs have experienced outflows of $9 billion, their peak assets under management once reached $170 billion and are now still around $100 billion. The $9 billion outflow is indeed significant, but in the grand scheme of things, it is not a large proportion. Moreover, those purchasing ETFs like Ethereum, Solana, and XRP, from our perspective, are quite aware of what they are buying; these are more like long-term asset allocations. Of course, many people are also trading leveraged ETFs.

I believe most of those getting into the market are aware that the assets they buy can experience a 70% drawdown every four years. So just like I said early on, if you told me that after such a significant price drop, the only outflow is this much, I would say that’s quite good. Compared to the entire cryptocurrency market, these ETFs are performing exceptionally well. Of course, the current trend doesn’t seem great, as we can see funds streaming out almost every day. But that’s the other side of the coin.

There's no doubt that AI-related assets are attracting all the attention and funds. The double-leveraged single-stock ETFs I mentioned earlier, as long as they're related to AI, are seeing skyrocketing growth, with significant capital inflow and enormous trading volumes. Interestingly, the purest AI leading stocks, such as SpaceX, Anthropic, and OpenAI, you find it quite difficult to get exposure to through traditional means. But ETF issuers are trying various ways. I’ve seen issuers applying for single-stock ETFs for companies that haven’t even gone public yet. Just yesterday, there was an application to issue covered call ETFs for SpaceX, OpenAI, and Anthropic. These three companies aren’t even listed yet! Although they will likely IPO this year, it shows that the thinking of issuers is quite advanced. They recognize the market's desire for AI and their thinking is, "We need to get the application documents ready so that once these companies IPO, we can quickly push products to market."

Changes in Institutional Holdings: Who is Selling?

Host:

What do the latest 13F filings show?

James:

First, the latest data (as of last year's fourth quarter) shows that investment advisors net sold nearly 22,000 bitcoins in the fourth quarter. This is related to what I previously mentioned about basis trading potentially collapsing and the outflows we are seeing. Hedge funds are the biggest sellers; they are also the top two categories of holders in the 13F reports.

As of the third quarter of 2025, about 26-27% of holders are institutions that submit 13F reports to the SEC. But this proportion fell to 24% by the end of last year. This indicates that we do see an overall decline in the allocation of these institutions.

However, that doesn’t mean everyone is selling. Many institutions are buying for the first time, and many are increasing their allocation. However, it’s important to remember that 13F reports only show long positions. For instance, we see that Jane Street holds Bitcoin ETFs worth several billion dollars, but I can almost guarantee that they are not "having an epiphany" like Michael Saylor and simply going long on several billion dollars. They are likely hedging, and their overall position may even be net short.

So, when you see someone on social media exclaiming, "Look who bought Bitcoin ETFs!" understand that this is merely part of their entire trading strategy. Therefore, the most surprising point from the 13F data is: this is a net sale from 13F-reporting institutions, primarily driven by hedge funds, ETFs, and broker-dealers. And this doesn’t even include the larger-scale capital outflows we saw in January and February. Based on current prices and capital outflow conditions, I suspect that when the data for the next quarter comes out, institutional holdings may further decrease.

Of course, there are new buyers entering the market. For example, media reports mention that the Hong Kong entity Lioner Limited has purchased about $437 million worth of IBIT (BlackRock's Bitcoin ETF). So, there are always new stories in the market.

Tokenization and the Future of ETFs

Host:

What do you think about ETF tokenization?

James:

Theoretically, there are many advantages:

• 24/7 trading

• Atomic settlement

• Globally accessible

But real progress will be slow. ETFs have not completely replaced mutual funds since their inception in 1993, and tokenization will also be a similar long process.

I think the earliest implementations will be:

• Tokenized government bonds

• Tokenized dollars

True comprehensive asset tokenization needs to resolve a lot of regulatory issues.

Signals of ETF Fund Flows

Host:

For many years, people passively bought tech stocks like QQQ (Nasdaq Index ETF). But now, we see significant capital flowing out of the tech sector to other sectors. What have you observed from the ETF fund flows and trading perspective?

James:

That's indeed the case. Let me first talk about the software sector. I’ve noticed that the software sector ETFs (like IGV) have seen huge trading volumes recently; everyone is using it to trade this theme. But interestingly, although software stocks are declining, this ETF itself is continually attracting inflows, which can be seen as everyone is "bottom-fishing." This sharply contrasts with the situation of cryptocurrency ETFs, which overall are still experiencing outflows.

As for the sector rotation you mentioned, we are seeing large amounts of capital flowing into other industries outside of tech. In the first quarter of 2026, the top three industry ETFs by capital inflow are: First, the energy sector; second, the materials sector; third, the industrial sector. Fourth is the thematic ETFs, with the largest theme being natural resources. This clearly shows that capital is flowing into large-cap value stocks with cash flow and hard assets.

I believe this doesn't necessarily mean all funds are "flowing out" of the tech sector, but rather that incremental funds are no longer rushing into the "big seven tech giants," but are beginning to diversify investments. We are seeing similar trends in international stocks and emerging markets, which aligns with Trump's view that a weaker dollar might benefit international markets. view.

When a sector is small, the impact of capital inflows can be quite significant. Billions of dollars flowing into tech stocks may go unnoticed, but flowing into industrial or consumer sectors can drive the index up and be reflected in the increase of valuation multiples. This indeed represents a positive "broadening" of the market, which is a very healthy signal. For active fund managers, this kind of irrational overall buying or selling of a sector creates the exact stock-picking environment they dream of since they can unearth mispriced stocks.

Host:

Indeed, this is very exciting. As market observers, the past year and a half has been full of various topics worth studying. From uranium to industrial stocks, it's no longer just about trading tech stocks.

James:

I completely agree. That’s why I love my job. ETFs cover almost every industry and theme you can think of, allowing us to glimpse the overall market situation and trends from the perspective of fund flows and product issuance. I can be a "mile wide, inch deep" generalist and then dive deep into specific areas like cryptocurrency when needed. deep delving.

Host:

Finally, we want to talk about another area that is experiencing turbulence—private credit. Some people believe it faces issues similar to those in the software sector. What do you think?

James:

Yes, that’s a big topic. The issues in private credit are indeed related to software companies. In the past, software companies, due to stable profit margins and low capital expenditure, appeared to have very solid cash flows, making them ideal borrowers for private credit. But if these software companies' business models are disrupted by technologies such as AI in the coming years, then their stable cash flows will be threatened, which would undoubtedly impact the private credit market.

Another massive trend related to this is that people are trying to package non-liquid assets such as private equity and private credit into ETFs. For example, there’s an ETF called XOVR that holds shares of SpaceX through a special purpose vehicle (SPV). Initially, SpaceX might only have a 10% stake, but due to a large influx of funds buying this ETF to gain exposure to SpaceX, its stake gets diluted. The problem is that investors are eager to gain exposure to these non-liquid assets through ETFs, but this structure has a fundamental mismatch.

According to regulations, investments in non-liquid assets within an ETF typically have a cap (e.g., 15%). Moreover, I personally believe that assets like private credit and private equity are more suitable for closed-end funds or periodically open-end funds since investing in these assets should inherently involve a lock-up period. But investors are not fond of these structures, as they have higher fees and cannot be redeemed at any time.

I often argue with my boss about this. He believes these should be allowed into ETFs, even if the ETFs trade at a significant discount, as at least investors could sell them on the secondary market when they wish. Whereas I think if you buy such a product, you shouldn’t be able to easily sell it on a whim at 2 PM on a Tuesday.

But ETFs do have a unique advantage in price discovery. For instance, during the "Arab Spring" in the Egyptian market or the Greek debt crisis, ETFs tracking these markets traded daily, while the underlying market was closed. At that time, the trading price of the ETFs could be significantly below the net asset value (NAV), making it seem "broken." But in reality, when the market reopened, the opening price of the stocks aligned perfectly with the previous ETF trading prices. This indicates that ETFs effectively discovered prices earlier. For instance, during the COVID-19 period in the high-yield municipal bond market, some ETFs were discounted as much as 30% because the entire market-making space was in a "no quote" state, meaning the ETF trading prices genuinely reflected market fears and a liquidity dry-up, while the NAV could not reflect this due to the lack of trades.

Thus, how to transform these non-liquid assets, which are only valued quarterly, into tradable liquid products on a daily basis is a major problem we need to solve in the future. Because more and more excellent companies are choosing to stay private for longer periods, such as Anthropic, everyone wants to invest in it, to the point where some people are even buying shares of Zoom, which holds a minor stake in Anthropic. It’s already getting a bit crazy.

Host:

Yes, people are eager to gain exposure. James, it’s been a pleasure talking to you today; thank you for your profound insights.

James:

Thank you for having me, I’m glad to be here.

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