Hedge funds cut 68,000 BTC ETF exposure, sovereign funds step in

Nine hedge funds and banks shed 68,000 BTC worth of spot ETF exposure as the cash-and-carry trade evaporated, while wealth platforms and sovereign funds increased their holdings, according to Galaxy Research.

Institutions filing quarterly 13F reports showed a drop in spot ETF shares from 355,000 BTC at the close of September 2025, just before Bitcoin’s all-time peak, down to 307,000 BTC by June 2026, a 14% decrease.

Millennium Management, alongside Brevan Howard, Goldman Sachs, Capula Management, Farallon Capital, D.E. Shaw, Schonfeld Strategic Advisors, Symmetry Investments, and Tudor Investment, accounted for this decline, collectively cutting 68,000 BTC exposure, valued near $5.4 billion at current prices.

Conversely, roughly 2,200 other filers added about 20,000 BTC in total, amounting to roughly $1.6 billion. Buyers included Morgan Stanley’s wealth management arm, Mubadala from Abu Dhabi, and the Abu Dhabi Investment Council.

Galaxy Research head Alex Thorn suggests the selling stemmed from the trade structure, not a negative view of Bitcoin. Many utilized the cash-and-carry strategy, profiting from the basis between spot ETF shares and shorting CME Bitcoin futures.

This basis has significantly shrunk; in the 30 days before Bitcoin’s high, it averaged 7.9% annualized, well above three-month Treasury bills. By October 21, it averaged only 4.8%, just 0.6 points over bills.

Thorn noted, “That arithmetic, not the price, is why the multi-strategy desks left,” estimating the trade now yields about 1.5 points over cash after accounting for fees, rolling costs, and margin.

CFTC data confirms this trend, showing asset managers’ net long position on CME Bitcoin futures fell from 43,300 BTC during the peak week to 18,400 BTC, representing a 57% decrease.

Despite the recent selling, funds have added 87,000 BTC since the June low, a pattern Galaxy calls directional buying rather than carry trading.

Why it matters

This shift indicates a change in institutional sentiment, moving away from purely arbitrage-based trading toward different investment strategies. Readers should watch to see if sovereign wealth and wealth platforms continue to drive accumulation amid fading carry trade opportunities.