Crypto Hedge Funds Turn Selective as Weak Markets Split Winners From Laggards

Key Point

Several investors and analysts said crypto liquid and hedge funds face difficult markets as Bitcoin remains below its October highs. Ryan Watkins said passive exposure to major crypto assets has generally not worked well this year, while concentrated exposure to outperformers such as Hyperliquid's HYPE has. Amir Hajian said around 85% of the roughly 118 token launches tracked in 2025 now trade below their opening prices. Richard Galvin said Digital Asset Capital Management materially reduced its liquid fund's bitcoin weighting over the last two months and holds around 20% cash.

Market Sentiment

Cautiously Bearish, Flow-led, Rotation.

Reason: Fund managers said passive exposure to major crypto assets has generally not worked well this year, which points to selective positioning rather than broad market demand.

Similar Past Cases

This type of fund-selection cycle typically favors concentrated strategies and makes broad exposure less reliable. The current cycle differs because investors linked the dispersion to fundamentals rather than early deal access.

Ripple Effect

Fund selectivity could push liquidity toward tokens with visible users and revenue, while weaker launches may face thinner secondary-market demand. If retail participation stays weak, broad altcoin exposure may remain less attractive than concentrated positioning.

Opportunities & Risks

Opportunities: Monitor whether fund managers keep rewarding tokens with real products, users, and revenue. Persistent selectivity may support focused research over broad market exposure.

Risks: Watch whether retail participation remains weak. Weak retail demand may limit a broad altcoin rally and keep dispersion high.