The growing institutional embrace of digital assets continues to accelerate, with prominent hedge funds like Millennium Management, Capula Management, and Tudor Investment significantly increasing their exposure to U.S. spot bitcoin exchange-traded funds (ETFs) during the third quarter of 2024. According to recent 13-F filings with the Securities and Exchange Commission (SEC), these firms are capitalizing on strategic market opportunities driven by regulatory optimism, election-related volatility, and attractive arbitrage setups in the crypto derivatives space.
This surge in institutional adoption underscores a pivotal shift in how traditional finance players view bitcoin—not just as a speculative asset but as a viable component of diversified investment portfolios. As spot bitcoin ETFs gain traction, they are enabling hedge funds to gain regulated, liquid exposure without the complexities of direct custody.
The Rise of the Bitcoin Basis Trade
One of the key drivers behind this increased allocation is the so-called bitcoin basis trade, a leveraged arbitrage strategy that has become increasingly popular among macro and multi-strategy hedge funds. In this trade, investors buy spot bitcoin—either directly or through ETFs—and simultaneously short bitcoin futures contracts, which have consistently traded at a premium this year.
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The spread between spot and futures prices, known as the "basis," widened significantly following the U.S. presidential election results. At its peak on November 11, the annualized basis reached 17%, according to data from CF Benchmarks, before settling back to around 12%. This gap presents a compelling opportunity for funds seeking uncorrelated returns with limited directional risk.
“Hedge funds are harvesting that spread. It creates a very tactical, opportunistic trade,” said Gabe Selby, head of research at Kraken’s CF Benchmarks. “It has an uncorrelated return.”
Because 13-F filings only disclose long equity positions and not short bets or derivatives exposure, it's impossible to confirm whether these specific funds are actively engaged in the basis trade. However, their substantial increases in spot ETF holdings suggest they are positioning themselves to benefit from such strategies.
Major Hedge Fund Moves in Q3
Millennium Management Doubles Down
Millennium Management, led by Israel Englander, made one of the most aggressive moves, more than doubling its stake in the iShares Bitcoin Trust (IBIT) to 23.5 million shares—valued at approximately $849 million by quarter-end. The firm also expanded its holdings in other major spot bitcoin ETFs, including the ARK 21Shares Bitcoin ETF (ARKB) and the Bitwise Bitcoin ETF (BITB).
By September 30, Millennium had allocated roughly $1.7 billion across various crypto ETFs, including both bitcoin and ethereum-based products. While this represents a relatively small fraction of its estimated $70 billion in assets under management (AUM), it signals a strategic commitment to digital assets within a broader portfolio context.
Capula Adds to U.S. Bitcoin ETF Exposure
London-based macro hedge fund Capula Management also increased its exposure, adding shares in both the iShares Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund (FBTC). SEC filings reveal that Capula’s total holdings in these ETFs amounted to approximately $600 million by the end of Q3.
As a global macro player with deep expertise in fixed income and derivatives, Capula’s entry into spot bitcoin ETFs suggests confidence not only in bitcoin’s long-term value proposition but also in the structural efficiency of the new ETF ecosystem.
Tudor Investment’s Fivefold Increase
Paul Tudor Jones’ Tudor Investment Corporation dramatically ramped up its position in the iShares Bitcoin Trust, increasing its share count fivefold to 4.4 million. Known for his macroeconomic foresight and early advocacy for bitcoin as an inflation hedge, Tudor Jones’ move reinforces his belief in digital scarcity and monetary debasement concerns.
Schonfeld Strategic Partners is another notable fund that increased its bitcoin ETF allocations, further validating the trend of established players integrating crypto into mainstream strategies.
Election Catalyst and Market Momentum
The timing of these investments aligns closely with shifting political sentiment around digital assets. President-elect Donald Trump voiced strong support for cryptocurrencies during his campaign, pledging to implement friendly regulations and even proposing a national strategic reserve of bitcoin. While policy details remain unclear, the mere prospect of pro-crypto leadership has boosted investor confidence.
Bitcoin responded swiftly, surpassing $90,000 earlier in November—a new all-time high—before pulling back slightly. Spot bitcoin ETFs have surged roughly 40% since the end of September, meaning funds that maintained or initiated positions during Q3 are likely sitting on substantial unrealized gains heading into 2025.
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Why Institutions Prefer ETFs Over Direct Ownership
Despite growing comfort with digital assets, many hedge funds still prefer gaining exposure through spot bitcoin ETFs rather than holding bitcoin directly. Key reasons include:
- Regulatory compliance: ETFs operate within established securities frameworks.
- Operational simplicity: No need for cold storage infrastructure or custodial solutions.
- Liquidity: Shares trade on major exchanges like any traditional ETF.
- Transparency: Daily reporting and audit trails enhance trust.
David Duong, Coinbase’s institutional head of research, noted a surge in demand for trading capacity ahead of the election: “The bitcoin basis trade has climbed for the last few weeks. Leading into the election, we had multiple clients actually requesting increases in their credit lines (to trade).”
Frequently Asked Questions
Q: What is a spot bitcoin ETF?
A: A spot bitcoin ETF holds actual bitcoin rather than futures contracts or derivatives. It allows investors to gain exposure to bitcoin’s price movements through a regulated exchange-traded product.
Q: Why are hedge funds using the basis trade?
A: The basis trade exploits price differences between spot bitcoin and futures contracts. By going long spot (via ETFs) and short futures, funds can earn returns from the narrowing spread with minimal directional risk.
Q: Are these ETF positions risky given bitcoin’s volatility?
A: While bitcoin is volatile, many funds use neutral strategies like arbitrage to limit exposure. Additionally, ETFs provide a regulated layer of security compared to direct ownership.
Q: Can retail investors participate in similar trades?
A: Yes, though leverage and credit access may be limited. Retail investors can gain exposure via spot ETFs and monitor futures premiums using public data tools.
Q: How do 13-F filings impact market transparency?
A: These quarterly disclosures reveal institutional long positions in U.S.-listed securities, offering insight into where sophisticated investors are allocating capital.
Q: What does this mean for bitcoin’s future adoption?
A: Increased institutional involvement via ETFs signals maturation of the asset class and could lead to broader acceptance in traditional finance.
With major players like Millennium, Capula, and Tudor establishing meaningful positions in spot bitcoin ETFs, the narrative around digital assets is evolving—from fringe speculation to strategic allocation. As regulatory clarity improves and financial infrastructure strengthens, expect more institutions to follow suit.
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