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Bracebridge Capital's assets over 80% in Bitcoin ETF, hedge funds see arbitrage opportunities?

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Bracebridge Capital

According to a tweet by ETF analyst Eric Balchunas at Bloomberg, Boston-based hedge fund Bracebridge Capital holds multiple Bitcoin spot ETFs, including $300 million in Ark 21Shares' ARKB, $100 million in BlackRock's IBIT, and $26.52 million in Grayscale's GBTC, accounting for over 80% of its total assets. Balchunas noted that it is not a market maker or authorized participant, which is quite insane!

Over 80% of Assets in Bitcoin Spot ETF

Bracebridge Capital is a hedge fund based in Boston, Massachusetts. Founded in 1994, it manages funds for endowments of Yale University and Princeton University. According to its website, Bracebridge Capital trades various securities and derivatives primarily in fixed-income markets, aiming to achieve positive returns from pricing inefficiencies and is a management company that pursues absolute return strategies.

However, according to a tweet by Bloomberg ETF analyst Eric Balchunas, Bracebridge Capital has heavily invested in Bitcoin spot ETFs this year, including $300 million in Ark 21Shares' ARKB, $100 million in BlackRock's IBIT, and $26.52 million in Grayscale's GBTC, accounting for 86% of its total assets. The ARKB they purchased accounts for 9.94% of the total outstanding shares, even higher than Ark's own holdings of 6.68%!

Its 11th largest holding is "DJT," former U.S. President Trump's media company.

Trump's social media platform Truth Social's parent company goes public through a reverse merger, surging 58% intraday

Is the Crypto Market Full of Arbitrage Opportunities?

However, Bloomberg ETF analyst James Seyffart previously cautioned. 13F reports only indicate how many shares they held as of March 31, 2024. It does not include short positions or derivatives, so we cannot fully understand their true exposure on 3/31.

The so-called "absolute return strategy" aims to achieve positive returns under any market conditions. Therefore, various hedging tools and investment strategies are usually used in combination for investments, indicating the presence of many arbitrage strategies. So, if their 13F report reveals holdings of up to 86% in Bitcoin ETFs, does this also mean that this market is still immature, with few entrants, hence having many arbitrage opportunities in the early stages?