Hedge funds that previously contributed to the surge in U.S.-listed Bitcoin exchange-traded funds (ETFs) are now significantly withdrawing their investments, marking a stark change from their positioning last year, according to a recent report from Bloomberg.
Data from CF Benchmarks reveals that allocations among the largest hedge fund holders experienced a sharp decline of 28% between the third and fourth quarters of 2025. This notable retreat underscores a swift shift in institutional sentiment towards Bitcoin and its associated investment vehicles.
This pullback has coincided with a substantial drop in Bitcoin’s value, which has plummeted nearly 50% from its peak of over $126,000 in October, now trading closer to $64,000. This decline has been exacerbated by broader market volatility and macroeconomic concerns, including U.S. tariffs.
In recent months, rapid-fire investors, often referred to as “fast money” players, have been strategically de-risking their portfolios. What was once considered a lucrative and crowded trade—particularly involving basis strategies that capitalized on long positions in spot ETFs while shorting futures—has lost its appeal as potential returns have diminished and market positioning became overly crowded.
This unwinding of positions is reflected in the activities of several funds. Notably, Brevan Howard reduced its holdings in BlackRock’s iShares Bitcoin Trust by approximately 86% in the fourth quarter, highlighting the aggressive stance many major investors have taken to decrease their exposure to this asset class.
The broader implications of this shift are significant, as they signal not only a decline in price momentum but also a reevaluation of Bitcoin’s role within institutional portfolios. As cryptocurrency prices fell, alongside other risk assets, the prevailing narrative of Bitcoin acting as a dependable macro hedge has faced considerable scrutiny.
However, despite this exodus from hedge funds, it’s important to note that not all capital is fleeing the market. While hedge funds adjust their strategies, longer-term allocators and investment advisers appear to be maintaining their positions. This trend suggests a potential shift from speculative inflows toward a more stable ownership base, even amidst ongoing market corrections.
