Hedge funds such as Millennium Management, Capula Management, and Tudor Investment have significantly increased their investments in U.S. spot bitcoin exchange-traded funds (ETFs) during the third quarter. This surge in interest comes amid a volatile market influenced by recent political developments and the cryptocurrency's remarkable price movements.
The recent filings reveal that prominent hedge funds are taking advantage of the growing popularity of bitcoin ETFs. With the approval of spot ETFs by the Securities and Exchange Commission earlier this year, firms are now more inclined to invest in these financial products.
Among the hedge funds making significant moves is Millennium Management, which has more than doubled its holdings in the iShares Bitcoin Trust. The firm now holds 23.5 million shares, valued at approximately $849 million. This increase reflects a broader trend among hedge funds to diversify their portfolios with digital assets.
The political landscape has played a crucial role in the recent surge in bitcoin prices. President-elect Donald Trump has expressed a favorable stance towards digital assets, promising supportive regulations and a national stockpile of bitcoin. This endorsement has contributed to the cryptocurrency's rise, with prices recently exceeding the $90,000 mark.
As the market experiences volatility, hedge funds are capitalizing on the price discrepancies between spot bitcoin and its futures. This strategy, known as the bitcoin basis trade, involves buying spot bitcoin or its ETFs while shorting futures contracts that are trading at higher prices. Analysts have noted that this gap widened significantly following the election results, reaching a 17% annual basis before settling at 12%.
Gabe Selby, head of research at Kraken's CF Benchmarks, commented on the strategy, stating, "Hedge funds are harvesting that spread. It creates a very tactical, opportunistic trade. It has an uncorrelated return."
The filings reveal substantial increases in bitcoin ETF holdings among several hedge funds:
The growing interest in bitcoin ETFs among top hedge funds highlights a significant shift in investment strategies as firms seek to navigate the volatile cryptocurrency market. With political support and favorable market conditions, the trend of increasing exposure to digital assets is likely to continue, shaping the future of investment portfolios.
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