Bitcoin ETFs See 12% Price Drop, Hedge Funds Cut Holdings by 41%

Several prominent asset managers reduced their exposure to spot bitcoin exchange-traded funds (ETFs) in the first quarter of 2025, as the cryptocurrency’s price slid 12%. This marks a departure from earlier quarters when institutional investors had consistently increased their allocations to Bitcoin ETFs. The filings reveal a more nuanced picture, with hedge funds trimming positions while some financial advisory firms and sovereign wealth funds selectively added to their holdings.

Hedge funds were previously earning annualized returns of around 15% by exploiting the difference between spot and futures prices. However, the premium collapsed and reached its nadir around the end of March, leading to a reduction in holdings by hedge funds. Among the notable moves, Millennium Management slashed its stake in the iShares Bitcoin Trust ETF by 41% to 17.6 million shares and exited its position in the Invesco Galaxy Bitcoin ETF. It did, however, increase its holdings in the ARK 21Shares Bitcoin ETF and the Grayscale Bitcoin Mini Trust ETF. Brevan Howard also scaled back, cutting its iShares ETF stake by 15.6%.

The State of Wisconsin Investment Board, which made headlines in early 2024 for being among the first major institutions to back spot bitcoin ETFs, sold its entire six million-share holding in the iShares ETF during the quarter. At the same time, a few institutions entered or expanded their positions. Brown University disclosed a new $4.9 million investment in the iShares Bitcoin Trust ETF, marking its debut in crypto ETFs. Abu Dhabi’s Mubadala fund increased its exposure as well, bringing its stake in the same fund to over 8.7 million shares, valued at $408.5 million at the end of March.

Despite the recent consolidation, analysts remain optimistic about the health of the current Bitcoin rally. The market structure for Bitcoin remains constructive, with funding rates turning mildly positive. This mirrors the conditions seen during previous bull runs. Additionally, the report highlights that there has been dampened froth in 2x leveraged long BTC ETFs compared to past market rallies, indicating a more risk-averse trading environment.

The Relative Strength Index (RSI) on the daily chart for Bitcoin reads 69, slipping below its overbought level of 70 and pointing downwards. This suggests a weakening bullish momentum, and if the RSI continues to decline and moves below the neutral level of 50, it could signal a sell-off. However, if Bitcoin manages to recover and close above the $105,000 resistance level, it could open the door for a rally toward the all-time high of $109,588 set in January.

The recent pullback by major fund managers and the stabilization of Bitcoin prices reflect the cautious sentiment in the cryptocurrency market. While various factors continue to influence price movements, analysts remain optimistic about the long-term prospects of Bitcoin. The constructive market structure and risk-averse trading environment suggest that the current rally could have the potential for lasting momentum, potentially setting the stage for new all-time highs.