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The cryptocurrency market is facing extreme volatility and macroeconomic uncertainty. As a result, strategies that capitalize on the relative value differences between assets, rather than simply betting on price direction, are delivering overwhelming returns.
On February 18 (local time), cryptocurrency media outlet CryptoPotato reported, citing a report by Presto Research and Otos Data, that while crypto hedge funds have struggled since the beginning of the year, funds employing market-neutral strategies are the only ones generating gains. According to the report, the average return of all active crypto hedge funds last month was -1.49%. This marked the first time since late 2018 and early 2019 that both the fundamental and quantitative categories of the crypto market recorded four consecutive months of negative growth.
The performance gap by investment strategy was stark. Fundamental-based funds and quantitative funds posted losses of 3.01% and 3.51%, respectively, in January. In contrast, market-neutral strategy funds, which generate returns from price discrepancies regardless of market direction, achieved gains of approximately 1.6%. Over the past six months, the gap widened further. While market-neutral strategies recorded around a 5% gain, fundamental strategy funds suffered devastating losses exceeding 24%.
The decline of Bitcoin (BTC), the leading cryptocurrency, along with major altcoins, has been a primary factor behind deteriorating fund performance. Over the past six months, Bitcoin has fallen approximately 31%, Ethereum (ETH) 23%, and Solana (SOL) nearly 47%. Joao Wedson, founder of on-chain analytics platform Alphractal, stated that Bitcoin is currently trading in a stress zone where long-term holders are accumulating while short-term investors are selling. He noted that, given long-term holders remain in profit, the market may not yet have reached its final rebound point.
Investor positioning is also shifting to a defensive stance rather than panic-driven sell-offs. In early January, call option buying dominated as investors bet on upside gains, but after the rally failed, traders quickly repositioned into downside-protection structures. With inconsistent inflows into spot Bitcoin ETFs, combined with selling pressure from miners and whales, downside hedging strategies have dominated the market. However, experts note that compared to the chaotic mass liquidation event of October 2025, current leverage levels are being managed in a relatively orderly manner. They anticipate that the market will undergo a filtering process in which viable projects will clearly distinguish themselves.
Disclaimer: This article is for investment reference only and we are not responsible for any investment losses resulting from reliance on it. The content should be interpreted solely for informational purposes.