Bitcoin ETF Holdings Slump in Q1 – Are Wall Street Whales Losing Faith?

Institutional Bitcoin ETFs just saw their first notable outflow quarter since approval—$1.2B vanished from funds like BlackRock’s IBIT and Grayscale’s GBTC. The ’smart money’ plays coy while retail hodlers keep stacking sats.

Market jitters or strategic pause? Traders debate whether this reflects cooling ETF demand or just profit-taking after Bitcoin’s 150% 2024 rally. Meanwhile, gold ETFs bled $7B last quarter—but nobody’s writing obituaries for that ancient store of value.

The real tell comes next quarter: if allocations rebound, this was noise. If not, even crypto’s biggest institutional success story might need a shot of adrenaline. Just don’t tell the SEC—they’re still recovering from approving these things in the first place.

Source: Fintel (IBIT Q1 2025 allocation)

The average portfolio allocation in IBIT dropped by 15.6% in the past quarter, data from Fintel showed. 

BTC ETF- Q1 rebalance

Additionally, Millennium Management LLC slashed its IBIT position by 41% to 17.6 million shares and closed its position in the Invesco Galaxy Bitcoin ETF (BTCO).

However, the fund added BTC-related exposure from Ark 21Shares and Grayscale Mini. 

Another hedge fund, Brevan Howard, reduced its IBIT holdings by 15.6%. 

The rebalancing and reduced exposure weren’t surprising given the market headwinds seen in Q1 2025 amid tariff wars.

Over the same period, BTC dropped about 12% in the first three months of the year, up from $109K to $76K. 

Bitwise CIO, Matt Hougan, told Reuters that the cautious approach may be due to reduced basis trade — the price difference (premium) funds get when they buy spot BTC ETF and short CME BTC Futures. He said, 

“But that premium collapsed and reached its lowest around the end of March. So I’m not surprised to see hedge funds trim their holdings.”

Source: Velo (BTC annualized basis trade)

The premium was lucrative and hit a whopping 15%-20% annualized returns in late 2024, added Hougan.

However, the basis trade sharply dropped below 4% in March, and may partly explain the reduced interest in the products. 

In Q2 2025, the premium surged to 9% but has slightly eased below 8% at the time of writing. A similar picture was painted by the demand for spot BTC ETFs. In February and March, the products saw over $4B in outflows. 

Source: Soso Value

However, in April and the first half of May, they have seen $5.2 billion in inflows, a renewed demand that lifted BTC above $100K for the first time since February. 

From a market snapshot, current BTC levels reflected a bull mode seen before the November massive run-up, according to the CryptoQuant Bull Score Index reading of 80. 

Source: CryptoQuant

More inflows into U.S. spot BTC ETFs could rally BTC higher. However, any faltering in demand for the products could likely lead to a local top for the crypto asset. It traded at $103K at press time.