Air in the system?
 

So I drained and filled the coolant on my 2010 x3 and have noticed that in the morning during warm up, the temp needle slowly goes up near the middle and the moment I turn the heater on, needle slows goes back down to near cold mark. When I turn the heater off it will slowly come back up. Or when l leave the heater on when the needle dives down, it will eventually go back up to the middle and stays there throughout the drive.

This seems to happen only in the morning, I noticed.

sounds like a faulty thermostat