Hedge Funds Exit Bitcoin ETFs as Trade's Profitable Phase Ends

Hedge funds have been a driving force behind the growth of Bitcoin ETFs since their approval in 2024. However, as the market continues to evolve, many hedge funds are now stepping aside from these investments.

The initial appeal of Bitcoin ETFs for hedge funds was not due to any ideological commitment to cryptocurrency, but rather because they offered an attractive trading opportunity with a high degree of liquidity and arbitrage potential.

As the trade matured, however, the inefficiencies that initially made it so appealing began to fade. Volatility-adjusted returns declined, and bid-ask spreads tightened, reducing the opportunities for hedge funds to exploit mispricing.