Institutional Bitcoin ETF Holdings Drop 23% in Q1 2025

Institutional Bitcoin ETF holdings saw a significant decline in the first quarter of 2025, marking the first quarterly drop since the launch of US spot ETFs. According to a recent report, institutional investors’ exposure to Bitcoin decreased to $21.2 billion in Q1 2025 from $27.4 billion in Q4 2024, representing a 23% decrease over the period. The decline was attributed to an 11% quarter-over-quarter drop in Bitcoin’s price, as well as active selling by many investors, indicating a mix of valuation impact and strategic adjustments.

Professional money managers, in general, reduced their Bitcoin exposure during this period. However, financial advisers stood out as an exception, slightly increasing their Bitcoin holdings in Q1 2025. This trend reflects a shift towards long-term savings strategies rather than short-term profit tactics, with corporate Bitcoin adoption for treasury and reserve purposes driving the last business quarter.

On May 30, BlackRock's iShares Bitcoin Trust (IBIT) experienced its biggest day of outflows on record, with over $430 million exiting the investment vehicle after 31 days of consecutive inflows. This event highlights the volatility and dynamic nature of institutional investment in Bitcoin ETFs.

Despite the decline in institutional ETF holdings, Bitcoin treasury companies collectively hold over 1.98 million BTC at the end of the quarter, representing an 18.6% year-to-date increase. Strategy, the leading Bitcoin treasury company, acquired 15,355 BTC on April 28 and has accumulated BTC in 17 out of the 20 weeks leading up to June 2025. This indicates a strong institutional interest in Bitcoin as a long-term asset.

The trend of HODLing, where investors hold onto their Bitcoin rather than trading it, has been particularly pronounced. Bitcoin investors are holding onto their coins at the highest level in over two years, suggesting strong conviction among long-term Bitcoin holders who prefer cold storage to trading. This behavior reduces the available supply of Bitcoin on exchanges, contributing to the overall decline in institutional ETF holdings.

Institutional custody solutions have also played a significant role in the decreasing supply of Bitcoin on exchanges. Large financial institutions are increasingly opting for third-party custody platforms instead of public exchanges. Significant withdrawals were observed on June 5, with ETFs attracting a large portion of these Bitcoin. The net worth of assets managed across spot Bitcoin ETFs reached $44.54 billion as of June 5, up from around $1 billion at their launch in January last year. This trend is expected to continue, with a survey finding that 83% of institutional investors plan to increase their crypto exposure, with nearly 60% allocating over 5% of their assets under management to digital assets.

The collapse of FTX in late 2022 has also had a significant impact on Bitcoin exchange flows. Following the FTX collapse, there was a dramatic increase in Bitcoin withdrawals from centralized exchanges. This suggests that trust in crypto exchanges has declined since the FTX collapse, accelerating Bitcoin withdrawals to self-custody and alternative platforms for trading.

The decline in institutional Bitcoin ETF holdings and the reduced supply of Bitcoin on exchanges signal a potential supply shock. This trend is driven by institutional demand and increased HODLing, which are pushing the percentage of Bitcoin on exchanges to the lowest since 2018. The reduced supply on exchanges, coupled with the growing trend of HODLing, indicates a strong conviction among long-term Bitcoin holders who prefer to hold their assets in cold storage rather than trading them on exchanges. This behavior is likely to continue, as institutional investors increasingly opt for third-party custody solutions and allocate a larger portion of their assets to digital assets.