Hedge Funds Pile into Bitcoin ETFs, 13F Filings Show

A Bloomberg report shows that the number of hedge funds holding Bitcoin exchange-traded funds has increased to 1,950, with 701 new funds recently adding spot Bitcoin ETFs to their portfolios. Notable buyers include Millennium Management, Capula Investment Management, Schonfeld Strategic Advisors, and Steven Cohen's Point72 Asset Management.

"The crypto markets are strong because we have the sentiment shift," Galaxy Digital chief Mike Novogratz told CNBC in May. "Crypto is now an asset class. It will be next year, it will be forever. And it wasn't that way two years ago. There was risk around the asset class, and it's been de risked."

By the end of the second quarter, top investment firms like Goldman Sachs and Morgan Stanley were some of the largest holders of spot Bitcoin ETFs. Their clients increased their crypto investments, bringing the total to $4.7 billion.

"It's clear that institutional adoption of spot bitcoin ETFs continues to accelerate," said Nate Geraci, president of the ETF Store. "Generally speaking, institutional investors tend to have extremely rigorous due diligence processes which can lengthen the adoption period for any type of investment. The speed at which institutional investors are wading into spot bitcoin ETFs is astounding."

"One of our trading strategies involves providing liquidity within the ETF ecosystem. Given the current political tailwinds, we anticipate the introduction of more products in the US, including options on Bitcoin ETFs, Solana ETFs, and potentially others. This expansion would create further opportunities for our trading strategies," according to Adam Guren, founder and chief investment officer hedge fund Hunting Hill Global Capital.

In addition, on Thursday, asset manager Defiance, which oversees $1.4 billion in assets, launched the Defiance Daily Target 1.75X Long MSTR ETF, trading under the ticker MSTX. This fund aims to provide daily leveraged returns on MicroStrategy Inc.

MSTX is the latest addition to a growing lineup of ETFs that use derivatives to deliver amplified or inverse returns on individual companies.

"There is a reason why the front page of this fund’s prospectus is covered with disclosure in black bold print," Amrita Nandakumar, president of Vident Asset Management, said of the new MicroStrategy fund. "As an industry, we have a responsibility to ensure that investors understand that funds such as these are meant to be short-term trading vehicles and not long-term investments."