In the first quarter of 2025, a notable shift occurred in the cryptocurrency investment landscape as several high-profile asset managers reduced their stakes in spot bitcoin exchange-traded funds (ETFs). This move comes in the wake of a 12% drop in the price of bitcoin during the same period, according to recent regulatory filings. This marks a significant departure from previous quarters, where asset managers typically increased their holdings in spot bitcoin ETFs, as evidenced by quarterly 13-F filings with the Securities and Exchange Commission (SEC).

Spot bitcoin ETFs, which made their market debut in January 2024, have become a focal point for investors seeking exposure to the cryptocurrency market. However, the recent trend of asset managers cutting their stakes paints a more complex picture of investor sentiment. While hedge funds have trimmed their holdings, some financial advisory firms and wealth funds have either boosted or rebalanced their positions.

Matt Hougan, Chief Investment Officer of Bitwise Asset Management, provided insight into the dynamics driving these changes. "What we witnessed in the first quarter was the collapse of the premium that people were paying for bitcoin futures, which had set up a very lucrative basis trade," Hougan explained. Hedge funds, which had been profiting from the spread between spot and futures prices, were able to capture annualized yields in the region of 15%. However, this premium collapsed and reached its nadir around the end of March. "So I'm not surprised to see hedge funds trim their holdings," Hougan added.

One of the most notable moves was by Millennium Management LLC, which cut its holdings of the iShares Bitcoin Trust ETF by 41%, reducing its position to 17.6 million shares. The firm also exited its position in the Invesco Galaxy Bitcoin ETF. However, Millennium increased its stake in only two ETFs, boosting its holdings of the ARK 21 Shares Bitcoin ETF and the Grayscale Bitcoin Mini Trust.

Brevan Howard, a Jersey-based hedge fund, also trimmed its stake in the iShares ETF by 15.6%. The State of Wisconsin Investment Board, one of the earliest institutional investors to make a significant allocation to spot bitcoin ETFs in the first quarter of 2024, sold its entire six million share position in the iShares Bitcoin Trust in the first three months of 2025. Meanwhile, Brown University made its first foray into cryptocurrency ETF ownership during the same period, acquiring a stake in the same ETF worth $4.9 million at the end of March.

Abu Dhabi's Mubadala sovereign wealth fund, on the other hand, added to its holdings of the iShares ETF in the first quarter, bringing its total position to 8,726,972 shares, valued at $408.5 million. This move by Mubadala highlights the diverse strategies employed by institutional investors in the cryptocurrency space.

The mixed reactions from institutional investors underscore the complexity of the cryptocurrency market. While some hedge funds are reducing their exposure due to the collapse of the futures premium, others, like Mubadala, are increasing their stakes. This divergence in strategy reflects the differing views on the future trajectory of bitcoin and the broader cryptocurrency market.

Hougan emphasized the importance of tracking the actions of investment advisory firms. "That wave of adoption may be a slow-moving train, but it has forward momentum," he said. The long-term trend of institutional adoption of cryptocurrency ETFs could be a critical factor in determining the future stability and growth of the market.

The first quarter of 2025 saw a significant shift in the investment strategies of high-profile asset managers regarding spot bitcoin ETFs. While some hedge funds trimmed their holdings in response to market conditions, other institutional investors continued to increase or rebalance their positions. This divergence highlights the evolving nature of the cryptocurrency market and the importance of monitoring institutional adoption trends. As the market continues to mature, the actions of these institutional investors will play a crucial role in shaping the future of cryptocurrency investments.