Bitcoin’s ETF Exodus Was an Arithmetic Problem, Not a $BTC Conviction Crisis

Nine hedge funds and banks accounted for nearly all institutional selling in U.S. spot Bitcoin ETFs, while sovereign funds and wealth platforms bought during Bitcoin’s 2026 slump, according to a Galaxy Research report published Monday. Institutions filing quarterly 13F reports with the SEC held 355,000 BTC through spot ETF shares at the end of September 2025, before Bitcoin reached its all-time high; by June 2026, holdings had fallen to 307,000 BTC, a 14% decrease. Millennium Management, Brevan Howard, Goldman Sachs, Capula Management, Farallon Capital, D.E. Shaw, Schonfeld Strategic Advisors, Symmetry Investments and Tudor Investment collectively reduced their exposure by 68,000 BTC, roughly $5.4 billion at current prices, cutting positions by between 29% and 100%.

The departing firms largely pursued cash-and-carry trades rather than making a directional bet on $BTC, Galaxy head of firmwide research Alex Thorn said. They bought spot ETF shares while shorting CME Bitcoin futures to capture the basis, or price gap, between the two markets. The front-month basis averaged 7.9% annualized during the 30 days before Bitcoin’s high, 3.9 percentage points above three-month Treasury bills; in the 30 days to Oct. 21, it averaged 4.8%, only 0.6 points above bills. Galaxy estimated that fees, rolling costs and margin left the trade earning about 1.5 points over cash. “That arithmetic, not the price, is why the multi-strategy desks left,” Thorn wrote.

CFTC data showed the same contraction on both sides of the strategy. Asset managers’ net long position in CME Bitcoin futures fell from 43,300 BTC in the week of Bitcoin’s all-time high to 18,400 BTC, while leveraged funds’ net short position declined from 71,400 BTC to 30,600 BTC—a 57% drop for each. Open interest fell 28% in Bitcoin terms and 51% in dollar terms. November and December futures still priced in 6.3% to 6.5% at the Oct. 21 close, about 2 points over bills before costs, but Thorn said the premium did not compensate for tail risk: the basis inverted to negative 31% annualized in December 2022.

Among the buyers were Morgan Stanley’s wealth management arm, Abu Dhabi’s Mubadala and the Abu Dhabi Investment Council. The roughly 2,200 other 13F filers added about 20,000 BTC in aggregate, worth roughly $1.6 billion, while advisers, family offices and individuals not required to file 13Fs reduced their holdings by just 6.6% as Bitcoin fell 49%. Since June, funds have added back 87,000 BTC through straightforward buying rather than arbitrage.

U.S. spot Bitcoin ETFs recorded another week of outflows, shedding $82.4 million on Friday according to Decrypt’s ETF tracker, with outflows exceeding inflows on three of five trading days and totaling a net $228.6 million for the week. The rate outlook also shifted: after the Fed held rates Wednesday, year-end pricing moved from 59% odds of two hikes a month earlier to zero, with expected tightening cut roughly in half. October’s ETF flows stood at a $907 million outflow at the midpoint.