As crypto markets remain weak, fund managers are emphasizing asset selection, fundamentals, and alpha generation over broad market exposure. According to The Block, Ryan Watkins, co-founder of Syncracy Capital, noted that passive exposure to major crypto assets has generally not worked well this year, while concentrated exposure to outperformers like Hyperliquid's HYPE has delivered strong results. "I can't share our returns, but it's been a great year for us so far," Watkins said. Richard Galvin, executive chairman and chief investment officer at Digital Asset Capital Management, similarly highlighted that holding tokens such as Hyperliquid, Morpho, and Zcash has been a key factor separating strong performers from the broader market. The market is increasingly rewarding fundamentals rather than broad market exposure, with managers focused on idiosyncratic opportunities generally performing better than market timers and maximalists.
The crypto market is experiencing a sorting process where projects with real products, users, and revenue continue attracting capital while weaker assets fall behind. As reported by The Block, Amir Hajian, a researcher at crypto investment firm Keyrock, described this as a growing-up moment for crypto. The data reveals that around 85% of the roughly 118 token launches tracked in 2025 now trade below their opening prices, while every token that launched with a fully diluted valuation above $1 billion is underwater. This shift indicates the market is no longer rewarding investors simply for early access to deals, with focus shifting toward fundamental metrics instead. Most sources reiterated that a broad altcoin rally remains unlikely without a meaningful return of retail investors, and few expect that to happen anytime soon.
Fund positioning has become increasingly selective, with managers adopting more conservative approaches. According to The Block, Digital Asset Capital Management has materially reduced its liquid fund's bitcoin weighting over the last two months while maintaining a cash position of around 20% for potential deployment during market pullbacks. Syncracy remains long but selective, focusing on 'real disruption stories with legit fundamental acceleration'. Market-neutral strategies continue outperforming, with market-neutral funds up 2.15% year-to-date compared to directional strategies down 5.4%, generating annualized returns of around 19% over the past three years with lower volatility. Sanat Rao, chief investment officer of BTC Fund at Monarq Asset Management, noted that Monarq's market-neutral funds have posted solid positive returns so far this year while maintaining low correlation to the broader crypto market.
The crypto hedge fund landscape faces significant consolidation pressures as market conditions persist. As reported by The Block, 78% of crypto funds manage less than $50 million, compared with 38% of traditional hedge funds, while only about 2% of crypto funds have reached $1 billion in assets under management versus 10% of traditional funds. Industry experts expect closures to be inevitable if market weakness persists, with smaller directional funds struggling as investors gain cheaper beta exposure through exchange-traded funds. "Sub-$50 million funds do not have the fee base to survive a flat-to-down year, so prolonged weakness thins this cohort first," Rao noted. Larger firms are increasingly exploring acquisitions and partnerships as the industry prepares for fewer funds and larger average fund sizes in the coming year.
