Hedge Funds Cut Bitcoin ETF Holdings by 41% Amid 12% Price Drop

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, this 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, based in Jersey, 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.

This pullback by major fund managers highlights the cautious approach of institutional investors towards cryptocurrencies, despite the growing interest in digital assets. The recent decline in Bitcoin prices has led to a decrease in the overall percentage share of spot Bitcoin ETFs in institutional portfolios, suggesting that institutions are maintaining conservative allocations to cryptocurrencies. The pullback comes as the leading cryptocurrency continues to trade at lower levels, reflecting a decline in the past day. The risk-off sentiment among investors, pushing them away from speculative assets like cryptocurrencies, is evident in the reduced exposure of major fund managers to spot Bitcoin ETFs, as they seek to mitigate potential risks associated with the volatile cryptocurrency market.