Harvard reduces its bitcoin holdings by 20% and establishes a new position in ether.

The alteration may stem from intricate market factors, possibly indicative of the reversal of a strategy that profited from bitcoin treasury companies trading above their mNAV.

Harvard’s endowment manager has reduced its bitcoin holdings. (Xiangkun ZHU/Unsplash/Modified by CoinDesk)

What to know:

• Harvard University initiated its first investment in ether, acquiring nearly 3.9 million shares of the iShares Ethereum Trust (ETHA) while decreasing its investment in the iShares Bitcoin Trust (IBIT).
• The alteration may result from market factors, potentially signifying the unwinding of a strategy that profited from bitcoin treasury firms trading at premiums to their mNAV.
• Institutional ownership of IBIT shares dropped to 230 million in the fourth quarter from 417 million in the third.

Harvard University’s $56.9 billion endowment entered the ether market ETH$1,978.09 last quarter, while simultaneously reducing its bitcoin exposure BTC$68,770.50.

As per an SEC filing, the Harvard Management Company (HMC) purchased approximately 3.9 million shares of BlackRock’s iShares Ethereum Trust (ETHA), amounting to around $86.8 million.

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The institution also reduced its holding in the iShares Bitcoin Trust (IBIT) by 21%, divesting about 1.5 million shares. The bitcoin exchange-traded fund continues to be Harvard’s largest publicly disclosed asset at $265.8 million.

This transition follows a decrease in bitcoin’s price from a peak of approximately $125,000 in October to just under $90,000 by the end of the quarter.

However, this adjustment may relate less to market sentiment and more to market dynamics, as stated by Andy Constan, founder and chief investment officer at Damped Spring Advisors.

The divestment could indicate the reversal of a trade intended to benefit from bitcoin treasury companies trading at premiums relative to the worth of their BTC assets, measured by the multiple of net asset value, or mNAV, which assesses enterprise value against bitcoin value.

During the bitcoin price surge, digital asset treasury (DAT) firms like Strategy (MSTR) were trading at significant premiums to the value of the bitcoin they held. For instance, MSTR previously traded around 2.9 mNAV, indicating that investors were paying approximately $2.9 for every $1 of BTC.

This premium reflects not only the cash-generating potential of the underlying business but also the company’s ability to continue accumulating bitcoin. Nonetheless, various investors speculated on the narrowing of that mNAV gap. They held bitcoin indirectly through IBIT while shorting shares of Strategy and similar digital asset treasury (DAT) firms.

Subsequently, the unwinding occurred, according to Constan. As bitcoin’s price fell, so did the shares of DAT companies. For example, Strategy now trades at 1.2 mNAV. These traders may also be adjusting their portfolios, as bitcoin’s price nearly doubled last year despite the downturn, indicating it might exceed the institution’s target portfolio allocation, he noted on X.

Data from 13F filings with the SEC compiled by Todd Schneider at 13.info supports these observations. It shows that institutional ownership of IBIT shares declined to 230 million in the fourth quarter from 417 million in the third.

Harvard also increased investments in semiconductor manufacturers Broadcom and TSMC, along with Google’s parent company Alphabet and railroad operator Union Pacific, while reducing stakes in Amazon, Microsoft, and Nvidia.