Hedge Funds Dumped $5.4B in Bitcoin ETFs as Sovereign Wealth Bought

Nine hedge funds and banks sold roughly 68,000 Bitcoin worth of U.S. spot ETF shares — about $5.4 billion at current prices — between Bitcoin's October 2025 high and the end of June, according to quarterly SEC filings compiled by Decrypt's Tyler Warner. Millennium, Brevan Howard, Goldman Sachs, D.E. Shaw and five other institutions led the selling. Some trimmed positions by a third; others exited entirely.

The exits were not a verdict on Bitcoin. The multi-strategy desks had run a basis trade: buy the ETF, short Bitcoin in the futures market, and capture the spread between the two prices. Before the October high, that spread paid 7.9% annually — 3.9 percentage points above Treasury bills. By late October it paid 4.8%, barely half a point over T-bills. Galaxy's head of research Alex Thorn estimates that after fees and financing, roughly 1.5 points of excess return remained.

What does the rotation actually show?

Futures data confirms the unwind. Both legs of the trade shrank by nearly identical amounts — around 57% each — indicating a coordinated exit from arbitrage rather than directional selling. Thorn wrote: "That arithmetic, not the price, is why the multi-strategy desks left."

The buy side changed hands in kind. Morgan Stanley's wealth management arm, Mubadala and the Abu Dhabi Investment Council, plus roughly 2,200 other filers, added about 20,000 Bitcoin between them. Investors too small to file with the SEC — advisers, family offices and retail holders — cut holdings by just 6.6% while the price fell 49%.

Since June, the ETFs have absorbed another 87,000 Bitcoin, this time through straightforward directional buying rather than arbitrage. October illustrates the shift: the month was down $907 million at its midpoint, but $724 million arrived in the final eight sessions through Tuesday, leaving flows essentially flat and flipping the month green.

What else moved this week?

• The Federal Reserve held rates at 3.75%–4.00% in a 10-2 vote, with both dissenters favoring another quarter-point hike. Traders now assign zero odds to two rate hikes by year-end, down from 59% a month ago.
• Intercontinental Exchange, NYSE's parent, is partnering with Trade.xyz to launch regulated perpetual futures in the U.S., per Bloomberg. The venue will run on Hyperliquid's infrastructure and offer contracts pegged to equities, indexes, commodities and FX, pending regulatory approval. ICE takes an undisclosed equity stake.
• JPMorgan, Coca-Cola, Dell, AMD, Adobe, Applied Materials and Sandisk joined issuers blocking tokenized versions of their shares on the OKX-ICE venue, bringing the total to 33 in thirteen days.
• Visa's stablecoin settlement volume passed $25 billion annualized, more than ten times last year's level.
• Bitcoin ETFs recorded $137 million in net inflows Wednesday; ETH ETFs saw $21 million in net outflows.

What changed in tokens and treasuries?

Y Combinator named six crypto priorities for its October request for startups: AI-powered fundraising, USD and non-USD stablecoins, stablecoin neobanks, real-world asset tokenization, trading platforms, and API infrastructure for AI agents. The accelerator argued growth is now driven by institutional adoption rather than retail speculation.

Birch Hill, founded by Goldman Sachs and BlackRock alumni, raised $4 million led by Multicoin Capital to bring U.S. apartment, farm and energy loans onto public blockchains. Moody's assigned Ripple's RLUSD stablecoin an A2 long-term and P-1 short-term rating, one day after the OCC approved its national trust bank application, citing reserves held mostly in Treasury bills at BNY and a 103% coverage target.

Strategy shareholders approved daily dividend accrual on its four preferred stocks, with 99.3% voting in favor — moving STRC from 24 dividend record dates per year to 365 in an effort to dampen share volatility.

Blockchain data provider Allium, whose customers include Visa, Stripe and Coinbase, disclosed unauthorized access to its systems on October 25 and revoked every existing API key, instructing customers to reset passwords and enable multifactor authentication.

With the arbitrage fast money gone and basis spreads compressed, October's flow recovery now rests on directional buyers — sovereign funds, wealth managers and the 2,200 filers who replaced them.