Sovereign Wealth Funds Replace Hedge Funds in Bitcoin ETFs

Major financial institutions drastically reduced their positions in Bitcoin ETFs between the peak in October 2025 and the end of June. Nine banks and hedge funds sold approximately 68,000 units of the asset. The move totaled about 5.4 billion dollars at current values.

The divestment occurred because the arbitrage strategy lost financial appeal. Funds were looking to profit from the price difference between the ETF and the futures market. As this profit margin narrowed compared to Treasury bonds, the operation was no longer advantageous for these strategy desks.

In contrast, long-term investors have taken control of the market. The wealth management arm of Morgan Stanley and sovereign funds such as Mubadala and the Abu Dhabi Investment Council increased their stakes. About 2,200 other institutional investors also expanded their positions during the period.

The behavior of smaller investors reinforced the shift in the asset's holder profile. While prices fluctuated, retail investors and family offices kept most of their reserves. Since June, inflows into ETFs have grown again through direct purchases rather than arbitrage.

The macroeconomic landscape also showed relevant changes for the market. Expectations for further interest rate hikes by the Federal Reserve have decreased significantly. The easing of monetary tightening tends to favor risk assets globally.