Professional investors scaled back their Bitcoin positions sharply in the first quarter, shedding over 50,000 BTC and marking one of the steepest quarterly declines since the U.S. Spot Bitcoin ETF market began. According to a recent CoinShares report, total institutional Bitcoin holdings dropped from 313,000 BTC to 261,000 BTC, a 17% contraction in Q1 2026.
This reduction was largely concentrated among hedge funds and brokerages, with hedge funds cutting their exposure by roughly 31,400 BTC and brokerages reducing theirs by about 18,800 BTC. Major brokerage firms involved in the selling included Morgan Stanley, which exited an 8,300 BTC position, possibly linked to its recent Bitcoin ETF launch, and Jane Street, which trimmed 10,800 BTC in the context of declining ETF inflows. The selling trend coincided with Bitcoin’s 22% price correction during the quarter and reflected tactical risk-off moves by short-term and trading-focused participants amid weakening market conditions.
In contrast to this sell-off, longer-term institutional holders maintained or expanded their Bitcoin allocations. Banks notably increased their holdings by 7,800 BTC, with key traditional financial players such as JPMorgan Chase and Citigroup either initiating or growing their Bitcoin exposure. Governments and private equity firms also grasped the market opportunity, with sovereign entities like Abu Dhabi’s Mubadala Fund boosting government Bitcoin reserves by 1,100 BTC and private equity investments rising substantially by 24% quarter-over-quarter and more than doubling year-over-year.
These contrasting moves underscore a clear rotation in Bitcoin ownership during the market downturn. While hedge funds and brokerages — often involved in shorter-term trading or ETF-related strategies — took profits and reduced risk, strategic allocators continued to accumulate, shifting Bitcoin custody towards long-term holders including banks and sovereign wealth funds. This pattern aligns with historical Bitcoin downturns, where tactical participants exit, allowing long-term investors to absorb supply and strengthen their positions.