Millennium, Capula, Tudor pile bitcoin ETFs into portfolios

Hedge funds such as Millennium Management, Capula Management, and Tudor Investment significantly increased their exposure to U.S. spot bitcoin exchange-traded funds (ETFs) in Q3, leveraging a popular arbitrage trade fueled by election-driven price volatility.

The trade, known as the bitcoin basis trade, involves buying spot bitcoin or ETFs while shorting its futures, capitalizing on the price gap, which peaked at 17% annually after the election before narrowing to 12%.

Millennium boosted its holdings in iShares Bitcoin Trust to $849 million, with total crypto ETF investments of $1.7 billion, while Capula and Tudor also increased positions.

Spot bitcoin ETFs have surged 40% since September, driven by President-elect Donald Trump’s crypto-friendly stance. Hedge funds favor neutral strategies to mitigate Bitcoin's volatility, with growing demand for credit lines to capitalize on this trade.