Institutional Investors Show Divergent Strategies Amid Market Volatility
According to a quarterly filing with the U.S. Securities and Exchange Commission (SEC), the State of Wisconsin Investment Board (SWIB) completely liquidated its position in the iShares Bitcoin Trust (IBIT) during the first quarter of 2025. Wisconsin previously held over 6 million shares of BlackRock’s ETF worth approximately $355.6 million, a position formed just one quarter earlier after converting assets from the Grayscale Bitcoin Trust (GBTC). This decision is part of a broader trend of repositioning among institutional investors, as hedge funds and major asset managers adjust their strategies regarding Bitcoin ETFs.
Wisconsin Fully Exits Cryptocurrency ETFs
The most recent filing submitted to the SEC revealed that SWIB was one of the high-profile asset managers who cut their stakes in spot Bitcoin ETFs during the first quarter of 2025. In its 13F form filed with the SEC on May 15, the Wisconsin Investment Board reported no spot Bitcoin ETF positions, having liquidated all 6,060,351 IBIT shares that appeared in the previous quarter’s report.
“The decision to fully exit the position is noteworthy given that SWIB increased its stake in IBIT in the fourth quarter of 2024 and reallocated all GBTC shares in favor of IBIT,” notes Alexander Petrov, institutional investment analyst at CryptoView. “Such a 180-degree turn may indicate a change in strategic view on cryptocurrency assets or internal risk management mandates.”
SWIB previously reported managing more than $166 billion worth of assets at the end of 2024, with Bitcoin ETFs representing around 0.2% of its entire portfolio before the sell-off. The mass liquidation occurred just one quarter after SWIB reported purchasing additional IBIT shares in Q4 of 2024 and reallocating all 1 million shares held in GBTC to IBIT.
Hedge Funds and Institutional Investors Reposition BTC ETF Holdings
Recent regulatory filings disclosed that many high-profile asset managers cut their stakes in spot Bitcoin ETFs as BTC saw a 12% decline in the first quarter of 2025. However, Bitwise Asset Manager CIO Matt Hougan said hedge funds seeking to profit from the spread between spot and futures prices could capture annualized yields in the region of 15%.
“Changes in institutional investors’ positions often reflect not only a view on the underlying asset but also tactical considerations of arbitrage, asset allocation, and risk management,” explains Elena Maximova, research director at investment company DigitalHorizon. “In the case of Bitcoin ETFs, the disappearance of the futures premium relative to spot could have made some arbitrage strategies less attractive.”
Millennium Management cut its IBIT holdings by 41% to 17.6 million shares and exited its position in the Invesco Galaxy Bitcoin ETF. Meanwhile, Jersey-based Brevan Howard trimmed its stake in the iShares ETF by 15.6%.
However, not all institutional investors were reducing positions. Millennium Management increased its stake in two ETFs, boosting its holdings of the ARK 21 Shares Bitcoin ETF and the Grayscale Bitcoin Mini Trust. Abu Dhabi’s Mubadala sovereign wealth fund also added to its holdings of IBIT shares, bringing its total position to 8,726,972 shares, valued at $408.5 million at the end of March and over $512 million at current prices.
“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… But that premium collapsed and reached its nadir around the end of March… So I’m not surprised to see hedge funds trim their holdings,” noted Matt Hougan, CIO at Bitwise.
Brown University also made its first charge into crypto ETF ownership during the same quarter, acquiring a stake in IBIT worth $4.9 million.
Sharp Swings in Spot Bitcoin ETF Flows
Farside data shows significant fluctuations in spot Bitcoin ETF flows in recent days. On May 13, the ETFs posted a net outflow of $91.4 million, the largest daily withdrawal since April 30. The losses were entirely driven by Fidelity’s FBTC, which recorded $91.4 million in redemptions with no offsetting inflows across other issuers.
However, the trend shifted on May 14 as spot Bitcoin ETFs brought in $319.5 million in net inflows. BlackRock’s IBIT led the day with $232.9 million of new capital, followed by Fidelity’s FBTC at $36.1 million and smaller positive contributions from Bitwise’s BITB, Ark’s ARKB, and Valkyrie’s BRRR. Grayscale’s GBTC also saw a modest inflow of $35.2 million, marking a notable break from its usual pattern of daily outflows.
“This volatility in ETF flows reflects uncertainty and disagreement among investors about Bitcoin’s short-term prospects,” comments Dmitry Sokolov, senior analyst at cryptocurrency exchange Bittrex. “While some institutional investors are taking profits or reducing risks, others are using current price levels as an opportunity to build positions.”
The $319.5 million inflow on May 14 erased much of the negative impact from the previous session and kept the broader monthly flows mostly positive. It also marked one of the strongest daily performances in May so far.
Institutional Restructuring: Causes and Effects
SWIB’s decision to completely sell its Bitcoin ETF position raises questions about the reasons behind such a move and its possible implications for the market. Several factors could have influenced this decision:
- Risk Management: The 12% decline in Bitcoin price during the first quarter could have triggered internal risk management protocols, especially for a conservative state pension fund.
- Changes in Asset Allocation Strategy: As noted in the report, Bitcoin ETFs constituted only 0.2% of SWIB’s portfolio, and the decision to exit could have been part of a broader review of alternative investments.
- Profit Taking: If SWIB entered the position in the early stages of the ETF launch, the fund could have locked in significant profits despite the correction in the first quarter.
- Regulatory Considerations: State investment funds often face additional restrictions and scrutiny from legislative bodies, which could have influenced the decision to exit cryptocurrency investments.
“SWIB’s decision should not be taken as a signal for the entire institutional market,” emphasizes Mikhail Verin, managing partner of crypto fund BlockchainCapital. “As the data on other institutional investors shows, there is significant divergence in strategies. While some are reducing positions, others, like Mubadala, are increasing them.”
The divergent movements of institutional players indicate an ongoing process of integrating cryptocurrencies into traditional portfolios. As the Bitcoin ETF market matures, we are likely to see a more nuanced approach to this asset class, where decisions are made based on organization-specific factors rather than a single market trend.
Outlook for Bitcoin ETFs
The recent volatility in flows and institutional investor decisions create a mixed picture for the future of Bitcoin ETFs. On one hand, the exit of major players like SWIB may cause short-term uncertainty. On the other hand, continued interest from new participants such as Brown University and increased positions by funds like Mubadala point to the long-term viability of these instruments.
“The Bitcoin ETF market is still in its early development stage,” notes Alexei Kirienko, CEO of financial consulting company Exante. “In the first years of any new investment product, it’s normal to see significant fluctuations in institutional investor positions as they experiment with optimal allocation strategies and entry/exit timing.”
As the market continues to mature, flow volatility will likely decrease, leading to more stable and predictable behavior. However, the underlying asset—Bitcoin—remains volatile, and this will continue to influence institutional investor decisions for the foreseeable future.
For retail investors, the key takeaway is that institutional adoption of Bitcoin through ETFs continues, but it is not unidirectional or unchanging. As with any investment decision, it’s important to consider one’s own goals, investment horizon, and risk tolerance rather than simply following the actions of large institutional players.