Galaxy Research found that hedge funds and banks sold the bulk of Bitcoin spot ETF holdings during 2026's downturn, while sovereign wealth funds and Morgan Stanley's wealth management arm bought.
Institutions filing 13F reports held 355,000 BTC in spot ETF shares at the end of September 2025, before Bitcoin's all-time high. By June 2026, holdings fell to 307,000 BTC, a 14% decline. Nine firms drove nearly all that selling: Millennium Management, Brevan Howard, Goldman Sachs, Capula Management, Farallon Capital, D.E. Shaw, Schonfeld Strategic Advisors, Symmetry Investments and Tudor Investment. These nine cut 68,000 BTC worth of exposure, worth roughly $5.4 billion at current prices. Other filers added about 20,000 BTC in aggregate, worth roughly $1.6 billion.
Galaxy head of research Alex Thorn said the sellers were executing a trade, not making a directional bet. Many used the cash-and-carry strategy, buying spot ETF shares while shorting CME Bitcoin futures to capture the basis spread between the two markets.
That spread compressed sharply. The front-month basis averaged 7.9% annualized in the 30 days before Bitcoin's peak, standing 3.9 percentage points above three-month Treasury bills. By October 21, it averaged 4.8%, only 0.6 points above bills. After fees and costs, the trade now earns about 1.5 points over cash.
"That arithmetic, not the price, is why the multi-strategy desks left," Thorn wrote.
CME Bitcoin futures data showed asset managers' net long position fell 57% from Bitcoin's all-time high to mid-October. Leveraged funds' net short position on futures shrank by the same proportion.
Overall spot ETF holdings fell 11% from their October 2025 peak while Bitcoin fell 53%. Since the June low, the funds added 87,000 BTC, which Galaxy calls directional buying rather than carry trading.