A small group of hedge funds and banks accounted for most of the institutional selling in U.S. spot Bitcoin exchange-traded funds during Bitcoin’s 2026 decline, while wealth-management platforms and sovereign investors increased their exposure. The shift suggests that much of the selling reflected the weakening returns available from a trading strategy rather than a broad loss of confidence in Bitcoin.
According to Decrypt, a Galaxy Research report found that institutions filing quarterly reports with the U.S. Securities and Exchange Commission held spot Bitcoin ETF shares representing about 355,000 BTC at the end of September 2025, shortly before Bitcoin reached its all-time high. By June 2026, that figure had dropped to 307,000 BTC, a 14% decline.
The reduction was concentrated among nine firms. Millennium Management, Brevan Howard, Goldman Sachs, Capula Management, Farallon Capital, D.E. Shaw, Schonfeld Strategic Advisors, Symmetry Investments and Tudor Investment together reduced their ETF exposure by 68,000 BTC. At the prices cited in the report, that position was worth approximately $5.4 billion. Individual firms cut between 29% and 100% of their holdings.
The nine firms’ sales exceeded the total decline reported across all 13F filers. This means the other roughly 2,200 reporting institutions increased their combined holdings by about 20,000 BTC, worth approximately $1.6 billion based on the report’s figures.
Who bought as trading firms reduced exposure
The buyers included Morgan Stanley’s wealth-management business, Abu Dhabi sovereign investor Mubadala and the Abu Dhabi Investment Council. Advisers, family offices and individuals who do not submit 13F filings reduced their holdings by only 6.6% during the period in which Bitcoin’s price fell 49%.
The Galaxy analysis therefore depicts a market in which institutional activity was uneven rather than uniformly bearish. A limited number of large, sophisticated trading firms made substantial cuts, while some long-term or wealth-oriented investors continued to add or held on to more of their exposure.
A spot Bitcoin ETF holds Bitcoin or gives investors exposure to its spot price through shares traded on an exchange. Its shares can be used by different types of investors for different purposes, including longer-term exposure or trading strategies involving derivatives.
Why the carry trade became less attractive
Galaxy’s head of firmwide research, Alex Thorn, said many of the sellers were using a cash-and-carry strategy rather than making a straightforward directional bet against Bitcoin. In this approach, a firm buys spot Bitcoin ETF shares and simultaneously shorts Bitcoin futures. The potential return comes from the difference between the spot and futures prices, known as the basis.
That difference narrowed considerably. In the 30 days before Bitcoin’s peak, the front-month futures basis averaged 7.9% on an annualized basis, or 3.9 percentage points above the return on three-month U.S. Treasury bills. In the 30 days through October 21, the average had fallen to 4.8%, only 0.6 percentage points above Treasury bills.
After fees, financing and the costs of rolling futures contracts, Galaxy estimated that the strategy offered roughly 1.5 percentage points over cash. Thorn’s explanation was that the economics of the trade, rather than Bitcoin’s price alone, prompted multi-strategy desks to leave the position.
Data from the Commodity Futures Trading Commission on CME Bitcoin futures showed a similar unwinding. Asset managers’ net long position fell from 43,300 BTC around Bitcoin’s all-time high to 18,400 BTC, a 57% decline. Leveraged funds’ net short position, which is consistent with the futures side of a carry trade, also dropped 57%, from 71,400 BTC to 30,600 BTC.
Open interest declined by 28% when measured in Bitcoin and by 51% in dollar terms. Futures with later maturities still offered higher pricing: November and December contracts were priced at annualized rates of 6.3% to 6.5% at the October 21 close, approximately two percentage points above Treasury bills before costs. Galaxy argued that the modest premium did not adequately compensate for the risk of a sharp reversal. In December 2022, the basis had fallen to negative 31% annualized.
ETF holdings and the latest market picture
Spot ETF holdings fell 11% from their October 2025 peak to their July low, while Bitcoin’s price declined 53%. Since the June low, the funds have added 87,000 BTC, a move Galaxy classified as directional buying rather than carry-trade activity.
ETF flows have remained volatile. The funds lost nearly $1 billion over two weeks earlier in October, then recorded their strongest day in almost a month on October 19, when BlackRock’s IBIT accounted for all the buying. A three-day run of approximately $1 billion in inflows was followed by heavy outflows. BTF ETF flows turned positive again during the week, with about $286 million in inflows so far.
The 13F figures extend only through June and therefore do not capture more recent changes in positioning. Galaxy also discloses that it holds Bitcoin.
Moneyiar market data at 22:39 on October 25, 2026, showed Bitcoin at $80,430.51, down 0.08% over 24 hours and 1.32% over seven days. Monad was at $0.02155, down 0.49% in 24 hours but up 2.33% over seven days. EdgeX stood at $0.32443, up 0.81% daily and 13.63% weekly, while Gala was $0.001738, down 1.68% daily and 8.21% weekly.
