Core Viewpoint - Hedge funds that previously fueled the Bitcoin ETF boom are now rapidly withdrawing their investments, with a reported 28% decrease in Bitcoin ETF allocations from large hedge funds between Q3 and Q4 of 2025 [1][5]. Group 1: Market Trends - Bitcoin's price has dropped nearly 50% from its peak of over $126,000 in October of last year, reaching a low of approximately $64,300, marking the lowest level since February 6 [5]. - The decline in Bitcoin prices has been exacerbated by new fears stemming from U.S. regulatory actions, leading to a broader market sell-off [2][5]. - The trend of hedge funds de-risking has been evident over the past two quarters, with a significant sell-off triggered by the peak in October [5]. Group 2: Investment Strategies - The mechanism behind the current withdrawal includes a shift in price momentum, as Bitcoin has been falling in line with macro risks, undermining its perceived role as a hedge against inflation and market pressures [2][5]. - Over the past two years, Bitcoin basis trading became a popular strategy among hedge funds, involving buying spot Bitcoin ETFs while shorting CME futures to capture the premium between futures and spot prices. However, as more funds entered the market, the profitability of this strategy has diminished, with annualized returns dropping to around 4% as of February 9 [3][6]. Group 3: Contrarian Investments - Some investors are increasing their positions despite the downturn, with the Abu Dhabi emirate raising its holdings in the iShares Bitcoin Trust (IBIT) by 46% in Q4 of 2025 [7]. - Investment advisors have consistently increased their IBIT holdings over the past year, with a year-on-year growth of 145%, indicating a shift towards more stable funding sources that are less influenced by short-term market fluctuations [7].