A Galaxy Research report reveals that institutional selling in U.S. spot Bitcoin ETFs during the 2026 market slump was driven primarily by nine hedge funds and banks, while sovereign wealth funds and retail platforms acted as net buyers. Between September 2025 and June 2026, total holdings among 13F filers dropped from 355,000 BTC to 307,000 BTC, a 14% decline. However, nine specific firms—Millennium Management, Brevan Howard, Goldman Sachs, Capula Management, Farallon Capital, D.E. Shaw, Schonfeld Strategic Advisors, Symmetry Investments, and Tudor Investment—cut their combined exposure by 68,000 BTC, valued at approximately $5.4 billion. This reduction exceeded the aggregate decline across all filers, indicating that other institutions added roughly 20,000 BTC.
The primary buyers included Morgan Stanley’s wealth management arm, Abu Dhabi’s Mubadala, and the Abu Dhabi Investment Council. Galaxy attributes the exit of the selling firms not to a loss of confidence in Bitcoin, but to the collapse of the cash-and-carry arbitrage trade. The futures basis narrowed significantly, falling from an average of 7.9% annualized before Bitcoin’s high to 4.8% by October 21, leaving only about 1.5 points over Treasury bills after costs. Consequently, multi-strategy desks unwound positions as the risk-adjusted returns diminished. CFTC data corroborates this shift, showing asset managers’ net long positions in CME Bitcoin futures fell 57% from peak levels. Despite these outflows, spot ETF holdings have since recovered, adding 87,000 BTC since the June low, which Galaxy characterizes as directional buying rather than carry trades.
This divergence between sophisticated financial engineering strategies and traditional investment flows highlights a critical structural shift in how capital enters the crypto asset class. The exit of hedge funds like Millennium and Goldman Sachs underscores that a significant portion of recent institutional adoption was contingent on arbitrage opportunities rather than fundamental conviction in Bitcoin's value proposition. As the futures basis compressed due to increased market efficiency and competition, these fast-money players withdrew, revealing the fragility of yield-driven entry mechanisms. In contrast, the steady accumulation by sovereign entities such as Mubadala and the Abu Dhabi Investment Council suggests a more durable, strategic allocation approach that is less sensitive to short-term derivative spreads.
For the broader market, this transition signals a maturation phase where price discovery may become less distorted by leveraged carry trades. The reliance on narrow margins for institutional participation creates volatility when those margins vanish, as seen in the sharp reduction of open interest. Moving forward, the stability of Bitcoin ETF inflows will likely depend on whether long-term allocators continue to absorb supply without the support of arbitrage incentives. Investors should monitor the persistence of these directional buys versus any renewed attempts to exploit basis discrepancies, as the latter could reintroduce the same liquidity risks observed during the 2026 slump.
