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Hedge funds including Millennium Management, Capra Management and Tudor Investments increased their exposure to U.S. spot Bitcoin exchange-traded funds (ETFs) in the third quarter amid popular election-related arbitrage activity. This was revealed in the securities registration statement.
President-elect Donald Trump embraced digital assets during his campaign, promising friendly regulation and a national stockpile of Bitcoin. The cryptocurrency reached an all-time high by surpassing the $90,000 level earlier this week, but the gains have tapered.
During the election price swings, some hedge funds used leveraged trading to take advantage of the price difference between physical Bitcoin and its derivatives in the futures market, analysts said. Spot ETFs were approved by the Securities and Exchange Commission earlier this year.
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The seal of the Securities and Exchange Commission hangs on the wall of SEC headquarters in Washington. (Reuters/Jonathan Ernst/File Photo/Reuters Photo)
In so-called Bitcoin basis trading, investors buy spot Bitcoin or its ETFs and sell short crypto futures, which have been trading at significantly higher prices this year. The gap widened after the election results, reaching an annualized rate of 17% on November 11, but was capped at 12% on Friday, according to CF Bitcoin data.
“Hedge funds are taking advantage of that spread, creating very tactical and opportunistic trades,” said Gabe Selby, head of research at Kraken's CF Benchmarks. “There are uncorrelated returns.”
The positions disclosed this week in a 13-F filing represent only long-term bets by hedge funds on stocks, not bets on stock price declines or derivatives. Reuters could not determine whether a particular hedge fund is betting on such arbitrage, only if it is taking long positions.
Among the companies that increased their exposure to cryptocurrencies was Israel Englanders Millennium, which more than doubled the number of shares in its iShares Bitcoin Trust from the previous quarter to 23.5 million shares, valued at $849 million. ). We also increased our positions in the ARK 21Shares Bitcoin fund and Bitwise Bitcoin fund.
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| ticker | safety | last | change | change % |
|---|---|---|---|---|
| ibit | ISHARES Bitcoin Trust – USD ACC | 52.13 | 0.00 |
0.00% |
Overall, the New York-based hedge fund ended September with $1.7 billion under management in crypto ETFs, including spot Bitcoin and Ethereum funds. ETFs make up a small portion of the company's $70 billion in assets under management.
London-based macro hedge fund Capra also added additional stakes in iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund, according to an SEC filing Thursday. The total value of these positions was approximately $600 million.
Paul Tudor Jones' hedge fund Tudor has significantly increased its exposure to the iShares Bitcoin Trust Fund, increasing its number of shares fivefold to 4.4 million shares.
Schoenfeld Strategic Partners is another hedge fund that has added shares in Bitcoin funds.
Millennium and Tudor declined to comment on their positions. Other hedge funds did not immediately comment on the matter.
If hedge funds can maintain their positions into the fourth quarter, they could be poised to record big gains. Since the end of September, the Spot Bitcoin ETF is up about 40%, mainly due to the outcome of the US presidential election.
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Given that Bitcoin's price is more volatile, many hedge funds prefer more neutral trades that do not bet on the direction of Bitcoin's rise or fall.
David Duong, head of institutional research at Coinbase, said Bitcoin basis trading has been on the rise in recent weeks.
“We had multiple customers actually requesting an increase in their (trade) credit line in the lead up to the election,” he added.
