Spot Bitcoin ETFs face shifts as big players trim and shuffle holdings in early 2025

The first quarter of 2025 revealed significant changes in how institutional investors are managing spot bitcoin exchange-traded funds (ETFs). Following a strong 2024 with growing enthusiasm and rising stakes, recent SEC filings show some hedge funds trimming their positions, while financial advisors and wealth funds adjust or increase holdings. This mix of activity signals a new phase for bitcoin within institutional portfolios.

Senior financial analyst Christopher Peterson from Zxperts breaks down the trends and what investors should watch. Peterson explains that the first quarter of 2025 marked a crucial turning point in the market for bitcoin ETFs, with some hedge funds scaling back due to the collapse of futures premiums, while others, particularly wealth funds, maintained a cautious but steady interest. 

He notes that regulatory clarity and price stability are key factors for institutional investors considering long-term positions in bitcoin. Peterson emphasizes the importance of monitoring ETF market behavior, as these trends will likely shape future investment strategies and adoption rates.

Q1 Shake-Up: Shifting Bitcoin ETF Holdings

Bitcoin’s price fell 12% in the first quarter of 2025, prompting institutional investors to rethink their spot bitcoin ETF strategies. Earlier quarters saw consistent growth in holdings, but recent SEC 13-F filings highlight a more complex picture:

• Hedge funds reduced their stakes in several ETFs, especially those linked to bitcoin futures premiums.
• Financial advisory firms and wealth funds mostly rebalanced or increased their holdings.

For example, Millennium Management LLC cut its iShares Bitcoin Trust ETF holdings by 41%, now holding 17.6 million shares. The firm also exited the Invesco Galaxy Bitcoin ETF but increased stakes in the ARK 21 Shares Bitcoin ETF and Grayscale Bitcoin Mini Trust. Similarly, Brevan Howard trimmed its iShares ETF position by 15.6%.

Contrasting these moves, Brown University entered the bitcoin ETF market for the first time in Q1 2025, acquiring shares worth $4.9 million. Meanwhile, the State of Wisconsin Investment Board sold all six million shares of its iShares Bitcoin Trust, signaling a complete exit.

On the sovereign wealth front, Abu Dhabi’s Mubadala increased its holdings to over 8.7 million shares valued at $408.5 million.

This patchwork of adjustments shows a more cautious and strategic approach as bitcoin price volatility challenges previous momentum.

The Futures Premium Collapse

A key driver behind hedge fund pullbacks has been the collapse of the premium between bitcoin futures and spot prices.

In 2024, many hedge funds profited by exploiting the gap between futures prices and the spot price through a basis trade strategy. This trade generated annualized yields around 15% by capitalizing on the futures premium.

Matt Hougan, chief investment officer at Bitwise Asset Manager, noted, “The premium that people were paying for bitcoin futures collapsed and hit a low at the end of March.” The disappearance of this premium removed a lucrative hedge fund strategy, causing many to reduce their ETF holdings.

Without a meaningful futures premium, incentives for hedge funds to hold or expand spot bitcoin ETFs diminish, prompting portfolio reshuffling or exits.

Institutional Investor Behavior

Different institutional types have unique priorities, explaining the varied moves:

• Pension funds, like Wisconsin’s, typically pursue long-term, stable investments. Selling out may reflect caution amid volatility or portfolio reallocation.
• Universities and endowments such as Brown cautiously add crypto exposure, favoring small, measured steps over aggressive buys.
• Sovereign wealth funds embrace diversification with global reach, viewing bitcoin ETFs as a strategic alternative asset. Mubadala’s increased stake fits this pattern.

Christopher Peterson highlights, “Investors seek clarity on regulatory frameworks and price stability before committing heavily. Q1 showed a pause, not abandonment.”

What This Means for Investors

Spot bitcoin ETFs remain young, having launched in January 2024. Initial enthusiasm reflected growing confidence in bitcoin as a mainstream asset, but price swings and the futures premium collapse complicate the picture.

Here are the essentials for investors:

• ETF holdings fluctuate with bitcoin’s price. The 12% dip in Q1 2025 exposed institutional sensitivity to market changes.
• Hedge funds chase high-yield trades like basis trades, but these opportunities are short-lived and volatile.
• Financial advisors and wealth funds may signal gradual institutional adoption, buying cautiously or adjusting positions thoughtfully.

The balance between hedge fund exits and advisory or wealth fund entries will shape bitcoin ETF flows moving forward.

The Final Take: Watching Adoption Momentum

Bitcoin ETFs bridge traditional finance and crypto markets. The Q1 2025 adjustments are a reality check: some institutions took profits or cut losses, others made new moves.

Christopher Peterson advises, “This market grows steadily, punctuated by recalibration periods, not dramatic swings.”

Investors should:

• Follow regulatory updates impacting ETF rules and eligibility.
• Monitor the futures premium, which greatly influences hedge fund strategies.
• Track changes in financial advisor and wealth manager involvement as indicators of broader acceptance.

Bitcoin ETFs continue to find their place in institutional portfolios. The evolving mix of cautious optimism and strategic shifts suggests a maturing market where data and trends will provide the clearest guidance.