Hedge funds up bitcoin ETF holdings amid election-driven arbitrage opportunities

Major hedge funds, including Millennium Management, Capula Management, and Tudor Investment, significantly increased their investments in U.S. spot bitcoin exchange traded funds (ETFs) during the third quarter, as revealed by securities filings cited by Reuters.

This surge in exposure coincided with bitcoin reaching an all-time high of over $90,000 last week, driven by President-elect Donald Trump’s pro-crypto policies. Trump’s campaign promised regulatory support for digital assets and suggested creating a national bitcoin reserve, providing strong momentum for the cryptocurrency market. While bitcoin has since retreated from its peak, the rally sparked increased activity in a popular arbitrage strategy exploiting price differences between spot bitcoin and futures.

The “bitcoin basis trade” involves purchasing spot bitcoin or bitcoin ETFs while shorting bitcoin futures, which have consistently traded at a premium this year. After the election, this spread widened significantly, with annualized returns hitting 17% on November 11 before settling at 12% on Friday, according to CF Bitcoin data.

Although this week’s 13-F filings offer insights into hedge funds’ long equity positions, they do not disclose short positions or derivative strategies, leaving these arbitrage plays speculative.

Millennium Management, led by Israel Englander, more than doubled its stake in the iShares Bitcoin Trust (IBIT.O), holding 23.5 million shares valued at $849 million. The firm also expanded its holdings in ARK 21Shares Bitcoin and Bitwise bitcoin funds, closing the quarter with $1.7 billion in crypto ETFs—representing a small portion of its $70 billion in assets under management.

London-based Capula Management added positions in the iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund, bringing its total exposure to $600 million. Meanwhile, Tudor Investment, headed by Paul Tudor Jones, increased its stake in the iShares Bitcoin Trust fivefold, accumulating 4.4 million shares.