President-elect Donald Trump embraced digital assets during his campaign, promising friendly regulation and to accumulate a national stockpile of bitcoin.
Hedge funds including Millennium Management, Capula Management and Tudor Investment increased their exposure to U.S. spot bitcoin exchange-traded funds in the third quarter, securities filings showed, as a popular election-driven arbitrage trade ramped up. The cryptocurrency surpassed the $90,000 level to reach an all-time high earlier this week, although it has pared gains.
In the so-called bitcoin basis trade, investors buy spot bitcoin - or its ETFs - and short the cryptocurrency futures, which have been trading at substantially higher prices this year. This gap widened after the election result and on Nov. 11 reached 17% in an annual basis, CF Bitcoin data showed, but pared gains to 12% on Friday. "Hedge funds are harvesting that spread. It creates a very tactical, opportunistic trade," said Gabe Selby, head of research at Kraken's CF Benchmarks.
Overall, the New York-based hedge fund ended September with $1.7 billion in crypto ETFs, including spot bitcoin and ethereum funds. The ETFs account for a small portion of the firm's $70 billion in assets under management. Capula, a London-based macro hedge fund, also added more shares in iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Fund, according to an SEC filing on Thursday. Those positions totaled roughly $600 million.
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