You don't need to be at the limit case of 100% of the market owned by passive funds to start creating problems [1].

Still, my point was that passive EFTs create a constant bid on company shares, disregarding any fundamentals. The speculative mania of 2021 artificially inflated the market cap of many SPACs like NKLA - speculators have all the rights to do this, but passive ETFs will blindly follow and increase their allocation based on market cap (the effect goes both ways, as price goes down allocation decreases). Who has been buying NKLA shares? Vanguard, for one: look at fund flows since 2021, mostly positive https://etfdb.com/etf/VTI/#fund-flows most of those inflows result in purchases of NKLA shares.

[1] https://www.acheroninsights.com/blog/wbdvi4uarbd3hdssx3f5kaf...