Buy to the sound of the cannon, sell to the sound of the bugle. The old trading room adage has found its two camps in the American spot Bitcoin ETFs. Bitcoin lost 53% between its October 2025 record and its June low. However, the funds only returned 11% of their BTC. Galaxy Research sees a complete rotation of holders, outgoing hedge funds and incoming sovereign funds. You had read that Galaxy buried the bear market; here is who was running the market during the funeral.
ETFs received 110 million dollars in net inflows on Monday October 26, 176 million on Tuesday 27 then 137 million on Wednesday 28 according to SoSoValue. However, bitcoin fell back below $80,000 this Thursday, October 29, during the Asian session. It is hovering around $79,800 this morning. However, Galaxy places the breakout line of its thesis at $76,540, approximately 4% below the current price.
Key Points
Nine hedge funds and banks, including Millennium and Goldman Sachs, reduced their exposure to Bitcoin ETFs by 68,000 BTC between the end of September 2025 and the end of June 2026.
Mubadala, Abu Dhabi Investment Council and Morgan Stanley Wealth Management are among the buyers according to Galaxy Research.
ETFs have absorbed 87,000 BTC since the June 30 low.
Galaxy would invalidate its thesis below the 50-week moving average at $76,540.
Nine hedge funds dumped 68,000 BTC from Bitcoin ETFs
The first act is read in the 13F declarations. American managers with more than $100 million file their positions with the SEC every quarter. Between the end of September 2025 and the end of June 2026, these institutions reduced their spot Bitcoin ETF holdings from 355,000 to 307,000 BTC. The drop reached 14%. Nine names weigh more than all of hindsight. Millennium, Brevan Howard, Goldman Sachs, Capula, Farallon, D.E. Shaw, Schonfeld, Symmetry and Tudor reduced their lines from 29% to 100%. They sold a total of 68,000 BTC, approximately $5.4 billion at current prices.
In reality, these funds practiced cash-and-carry. The recipe is to buy ETF shares and sell opposite CME futures. The gain comes from the difference between the two prices, called the base. In the 30 days before the record, this base yielded 7.9% annualized. This was 3.9 points higher than three-month Treasury bonds. It then fell to 4.8% on October 21, or 0.6 points above the risk-free rate. “It was this arithmetic, not the price, that drove away multi-strategy desks,” writes Alex Thorn, head of research at Galaxy. His note was released to clients on October 22 and then picked up by Decrypt on October 28.
Furthermore, the American derivatives regulator, the CFTC, measured the same decline on the futures side. On CME bitcoin contracts, the net short position of leveraged funds fell from 71,400 to 30,600 BTC. Open interest melted 51% in dollar terms.
Sovereign Wealth Funds and Morgan Stanley Bought Falling Bitcoin ETFs
Who took the compensation? Over the same period, the other approximately 2,200 13F filers added around 20,000 BTC, or $1.6 billion. Among them, Galaxy cites the wealth management arm of Morgan Stanley, the Emirati sovereign wealth fund Mubadala and the Abu Dhabi Investment Council, without quantifying their purchases. ETFs have absorbed 87,000 BTC since the June 30 low, nearly $7 billion in the day's price. Galaxy classifies these purchases as directional, in other words without a selling leg in front.
In the details of the 176 million on Tuesday October 27 published by SoSoValue, BlackRock's IBIT took 151.5 million and Fidelity's FBTC 24.5 million. On Wednesday the 28th, the Fed left its rates between 3.75% and 4%. That day, the IBIT still captured 136 million out of the 137 million for the session. The 423 million recovered in three days do not compensate for the 774 million released on October 22 and 23. However, they bring the month's balance sheet back into the green, around 110 million.
What the rotation changes for the price of bitcoin
An arbitrageur sells when the basis tightens, regardless of the price. A sovereign fund sells when its thesis changes, which is to say rarely. The market therefore loses a source of mechanical sales and part of the volatility produced by the back and forth between Bitcoin ETF shares and CME futures.
The other side of the coin is called liquidity. Indeed, the arbitrage desks supplied both sides of the order book. Fewer counterparties mean more brutal movements as soon as a large order arrives. You saw him last night. Derivatives platforms liquidated $356 million in positions in 24 hours. Bitcoin fell as low as $79,600 on Kraken before briefly returning above $80,000 early this morning.
However, the 13F data stops at June 30 and says nothing about the 87,000 BTC entered since then. Galaxy also holds bitcoin, which the note specifies.
