Institutional positioning in Bitcoin exchange-traded funds shifted sharply between late 2025 and June 2026, with hedge funds and banks reducing exposure while sovereign wealth funds, wealth managers and other investors increased their holdings. The change came as the returns from a popular ETF-futures arbitrage trade narrowed substantially.
Why hedge funds reduced their Bitcoin ETF positions
According to Decrypt, regulatory filings covering the period from shortly before Bitcoin’s October 2025 high through the end of June showed that nine hedge funds and banks sold ETF exposure equivalent to about 68,000 Bitcoin. At prices cited in the report, that represented roughly $5.4 billion. Millennium, Brevan Howard, Goldman Sachs and D.E. Shaw were among the institutions identified as leading sellers; some reduced their positions by about one-third, while others exited entirely.
The selling did not necessarily represent a negative view of Bitcoin. Much of the institutional activity involved a market-neutral strategy: buying a spot Bitcoin ETF while taking an offsetting short position in Bitcoin futures. The investor seeks to capture the difference between the ETF and futures prices, rather than depend on Bitcoin rising or falling.
That spread was once attractive. Before Bitcoin’s October high, the annualized gap was reported at 7.9%, or 3.9 percentage points above the return available on U.S. Treasury bills. By late October, it had narrowed to 4.8%, leaving only about half a percentage point over Treasury bills. After fees and financing costs, Galaxy’s Alex Thorn estimated that the remaining advantage was approximately 1.5 percentage points over cash.
Futures data reflected the retreat: both sides of the trade contracted by nearly the same amount, around 57%. The figures indicate that the reduction was linked to the economics of the arbitrage position rather than simply a decision to abandon Bitcoin exposure altogether.
Sovereign wealth and wealth managers take the other side
While several large trading institutions were selling, a different group of investors was adding exposure. Morgan Stanley’s wealth management arm, Mubadala and the Abu Dhabi Investment Council were among the buyers. About 2,200 other filers collectively added roughly 20,000 Bitcoin through ETF holdings.
The reported filings also showed that investors below the threshold requiring such disclosures—including advisers, family offices and individual investors—reduced their holdings by only 6.6% during a period when the Bitcoin price fell 49%. The data therefore points to a contrast between short-term, yield-focused institutional activity and investors who maintained their exposure through the decline.
Since June, the funds covered in the report had added 87,000 Bitcoin. This time, the buying was described as direct exposure rather than the earlier ETF-futures arbitrage strategy.
Bitcoin ETF flows offered another indication of changing demand. At the midpoint of October, the ETFs were down $907 million for the month. Through Tuesday, that deficit had effectively disappeared, with $724 million entering the products over the previous eight sessions. On Wednesday alone, Bitcoin ETFs recorded $137 million in net inflows, while Ether ETFs posted $21 million in net outflows.
Rates, markets and the wider crypto picture
The Federal Reserve held its policy rate at 3.75%–4.00% in a 10-2 vote. Both dissenting officials preferred another quarter-point increase. Market expectations for additional tightening had nevertheless weakened: the probability assigned to two rate increases by the end of the year had fallen from 59% a month earlier to zero, according to the source material.
Major cryptocurrencies were lower alongside equities in the market snapshot. Bitcoin was down 1.6% at $80,000, Ether fell 2% to $2,320 and Solana declined 3% to $100. Hyperliquid’s HYPE token gained 7% to $88 after news of a partnership connected to the launch of perpetual futures in the United States.
The partnership involves Intercontinental Exchange, the parent of the New York Stock Exchange, and Trade.xyz. The proposed regulated U.S. platform would run on Hyperliquid’s infrastructure and offer contracts linked to equities, indexes, commodities and foreign exchange, subject to regulatory approval. ICE is also taking an equity stake in Trade.xyz, although the terms were not disclosed.
Visa’s annualized stablecoin settlement volume had passed $25 billion, more than ten times its level a year earlier. Separately, Y Combinator identified six crypto areas for startup development over the next six months: AI-enabled fundraising, dollar and non-dollar stablecoins, stablecoin-focused neobanks, real-world asset tokenization, trading platforms and API infrastructure for AI agents.
Moneyiar market picture
Moneyiar data recorded Bitcoin at $80,430.51 at 22:39 on October 25, 2026, with a 0.08% decline over 24 hours and a 1.32% fall over seven days. Among the other listed assets, Monad was priced at $0.02155, down 0.49% in 24 hours but up 2.33% over seven days. Tagger rose 5% in 24 hours to $0.000496 and gained 6.77% over seven days, while edgeX increased 0.81% to $0.3244 and was up 13.63% over the week. These figures are Moneyiar data at the stated times.
