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Hedge funds are fleeing Bitcoin en masse
Hedge funds that previously acted as key drivers of growth for crypto ETFs in the U.S. have begun exiting their positions en masse, according to Bloomberg. This has added further pressure on Bitcoin, which has already lost nearly 50% of its value from its all-time highs.
According to CF Benchmarks, total holdings of major hedge funds in Bitcoin declined by 28% in the fourth quarter of 2025. A notable example is Brevan Howard, which became the largest seller of shares in the iShares Bitcoin Trust by BlackRock. The fund reduced its stake by 86%, cutting the position from $2.4 billion to $275 million.
Analysts point to two main reasons behind the exit of speculative capital. First, Bitcoin has stopped functioning as a hedge against inflation and macroeconomic risks, declining in tandem with the equity market.
Second, the popular basis trade strategy (buying a spot ETF and shorting futures) has ceased to deliver outsized returns. While yields previously reached double-digit levels, by February 2026 they had fallen to around 4% annually due to market saturation.
“Fast money” is now being replaced by long-term investors who are using the dip to accumulate positions. Abu Dhabi, for instance, increased its stake in Bitcoin ETFs by 46% at the end of last year.
“Speculative capital has stepped back, and in its place a more resilient ownership base is forming,” concluded Gabe Selby, Head of Research at CF Benchmarks.
See also: "Investors withdrew nearly $440 million in one week from spot Bitcoin and Ethereum ETFs"
