Institutional backing for Bitcoin ETFs decreases in Q1, raising questions about waning institutional confidence.
Crypto Giants Slash Bitcoin bets in Q1 2025ShareTweet
Many funds have lowered their Bitcoin [BTC] holdings in Q1 2025. The state of Wisconsin cleared out all their $321 million in BlackRock iShares Bitcoin ETF (IBIT), according to the recent 13-F filings with the SEC.
Data from Fintel showed a 15.6% decrease in the average portfolio allocation for IBIT during the past quarter. In addition, Millennium Management LLC dropped 41% of its IBIT position, closing down its stake in Invesco Galaxy Bitcoin ETF (BTCO). At the same time, the fund acquired more Bitcoin-related investments from Ark and Grayscale Mini. Another fund, Brevan Howard, reduced its IBIT holdings by 15.6%.
The market challenges in Q1 2025, including tariff wars, might have contributed to these moves. Over this period, BTC dropped roughly 12% in the first three months of the year.
Bitwise CIO Matt Hougan speculates that the reduced interest in Bitcoin ETFs could be due to the erosion of the premium for acquiring spot BTC ETFs versus shorting CME BTC Futures. As the premium plummeted to its lowest towards the end of March, Hougan anticipates that this would explain the decreased involvement in these products. Although the premium surged to 9% in Q2, it has since eased below 8%.
In drier spells, outflows of $4B were recorded for Bitcoin ETFs in February and March. However, there was a sharp turn in April and May, with inflows reaching $5.2 billion, renewing interest in the crypto asset, which surpassed $100K for the first time since February.
Despite the current BTC levels resembling a bullish phase similar to the November massive run-up, continued demand for U.S. spot BTC ETFs could potentially boost BTC price even higher. Conversely, any waning interest could result in a local top for the crypto asset.
Although no information was found about Benjamin Njiri and Saman Waris specifically reducing their Bitcoin allocations, several prominent funds reduced their Bitcoin ETF exposure due to reduce basis trade returns and overall market difficulties. Their investment decisions indicate that the financial benefits from holding Bitcoin ETFs may no longer be attractive, leading to portfolio rebalancing.
Institutional funds like Millennium Management don't solely focus on eliminating Bitcoin ETFs but diversify their investments in related crypto products. The State of Wisconsin's complete divestiture from IBIT was significant, signifying the exit of a key institutional investor. Meanwhile, Mubadala Investment Company increased its holdings in IBIT by 6% during the same quarter, demonstrating variations in investment strategies among institutional investors.
- This decrease in Bitcoin ETF holdings by various funds, such as Millennium Management's reduction in IBIT position, suggests that the allure of investing in Bitcoin ETFs may not offer the same financial benefits as before, possibly prompting portfolio rebalancing.
- While no information is available about Benjamin Njiri and Saman Waris reducing their Bitcoin allocations, the crypto industry has witnessed top funds, like the State of Wisconsin completely exiting IBIT, indicative of a shift away from Bitcoin ETFs.
- Institutional investors showcase an interest in the broader crypto market, as demonstrated by Mubadala Investment Company's increase in IBIT holdings while other funds, like Millennium Management, diversify into related crypto products, such as Bitcoin-related investments from Ark and Grayscale Mini.
