Hedge Funds Are Dumping Bitcoin for Gold

The Scale of the Sell-Off

According to CF Benchmarks (based on 13F filings with the SEC), aggregate hedge fund positions in BTC ETFs dropped 28% over the quarter. In IBIT (BlackRock) alone, funds in the top-40 holders offloaded 32 million shares.

The most notable sellers:

• Brevan Howard – cut its IBIT position by 86% ($2.4B → $275M), the quarter's single largest seller

• Sculptor Capital – down 90%

• Farallon Capital – down 70%

• DE Shaw – down 52%

• Symmetry Investments – exited entirely

For the first time since the launch of spot ETFs, several crypto-focused funds reported zero exposure to both BTC and ETH simultaneously.

Why Now

Two factors drove the mass exodus.

1. The basis trade collapsed. Throughout 2024-2025, hedge funds aggressively traded the spread between spot ETFs and CME futures, harvesting the premium with no directional bet on price. It was the consensus carry trade – one of the most popular strategies in institutional playbooks. But by year-end, the futures premium had compressed from double digits to 3-4%. The strategy stopped paying for itself – holding large spot positions no longer made sense, and funds began systematically unwinding their exposure.

2. The "digital gold" narrative fell apart. Bitcoin dropped more than 45% from its October peak of $126,000 and failed to act as a safe-haven asset during a period of geopolitical turmoil. The BTC-gold correlation that held through 2022-2024 completely broke down in 2025. Institutions chose the original.

Gold Is Absorbing the Capital

Gold ETFs have accumulated $407 billion in AUM – more than double that of Bitcoin ETFs ($166B). Central banks were buying record volumes of gold, and the metal's price climbed back above $5,200.

On the BTC ETF side, the picture is a mirror image. Net assets of U.S. spot funds alone fell from $170B to $84B – cut exactly in half. Cumulative net inflows dropped from $63B to roughly $53B. According to SoSoValue, $1.6 billion was pulled from spot BTC ETFs in January 2026 alone.

Who's Buying What the Funds Are Selling

While hedge funds were exiting, a different class of investors was building positions.

• Investment advisors – increased their BTC ETF allocations every quarter throughout the year. Aggregate growth: +145% YoY

• Abu Dhabi's Mubadala – grew its IBIT position by 46% in Q4

• BlackRock – boosted its proprietary stake in IBIT by 328%

• Morgan Stanley, LPL Financial – also added every quarter

As CF Benchmarks put it: "The speculative capital that fueled the rally is gone. In its place, a more durable ownership base is forming."

What It Means

The BTC ETF market is undergoing a structural shift in its holder composition. Hedge funds with short time horizons and carry trade strategies are giving way to advisors, sovereign wealth funds, and large-scale institutional allocators.

Historically, this kind of rotation from speculative to structural capital is characteristic of bottoming phases. But until Bitcoin proves it can function as a genuine safe-haven asset under macro stress, gold will continue to siphon institutional flows. The question is whether this changing of the guard will lay the foundation for the next growth cycle or mark the beginning of a prolonged outflow.