Hedge funds reduced their holdings in US spot Bitcoin exchange-traded funds (ETFs) between late 2025 and mid-2026, while allocators increased their exposure to the cryptocurrency, citing research from Galaxy Research.

Nine hedge funds collectively cut their Bitcoin ETF holdings by approximately 68,000 BTC over the period, with the reductions largely attributed to changing relative-value opportunities rather than a fundamental shift in sentiment towards Bitcoin. Higher yields on US Treasury bills have made traditional arbitrage strategies involving Bitcoin ETFs less attractive to leveraged investors.

The retreat contrasts with growing allocations from sovereign wealth funds and wealth management platforms, suggesting a shift in the composition of institutional demand as longer-term investors increase their exposure while hedge funds scale back trading positions.

Although Bitcoin ETF holdings recovered modestly after June, the market experienced renewed net outflows in October, alongside a slowdown in corporate Bitcoin purchases, raising questions about the sustainability of the recovery.

Attention is now turning to third-quarter US regulatory filings, due by 16 November, which should provide greater clarity on institutional positioning. Continued accumulation by wealth managers could support demand for Bitcoin ETFs, while further reductions by hedge funds may leave the market vulnerable to additional selling pressure.