Institutional Investors Retreat From Bitcoin Amid Growing 'Identity Crisis'

Crypto hedge funds are sharply pulling back, with average cash balances rising to levels not seen since early 2025. For the first time, some funds report zero exposure to both Bitcoin and Ethereum. Analyst Nic Puckrin attributes the defensive stance to a lower reward-to-risk profile, an unprofitable basis trade, a shift toward crypto-linked equities and an uncertain macroeconomic backdrop.

The slowdown shows in spot Bitcoin ETF flows: since the start of 2026, funds have recorded nearly $4.5 billion in outflows, partially offset by just $1.8 billion in inflows during the first and third weeks of the year. Balances across spot Bitcoin ETFs have fallen by more than 100,000 BTC since their October record high.

Price pressure has also hit corporate holders and miners — Bitcoin miner Bitdeer sold all its BTC amid declining mining profitability.

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