Galaxy plans to launch a $100 million hedge fund, betting on the rise and fall of cryptocurrencies and concept stocks

Galaxy is launching a $100 million hedge fund to profit from the ups and downs of cryptocurrencies. The fund will be launched in Q1, with 30% invested in crypto tokens and 70% in financial services stocks. It has received commitments of $100 million from family offices and institutional investors, marking a new phase where the crypto market transitions from “only rising” to coexistence of bulls and bears.

Galaxy Hedge Fund Dual Market Strategy

According to a report by the Financial Times, the structure of Galaxy’s hedge fund will focus on long and short positions in digital assets and traditional stocks related to financial infrastructure. This strategy is fundamentally different from traditional crypto investment funds, which typically only go long (bet on price increases), whereas hedge funds can go both long and short (bet on price declines), allowing profit even during market downturns.

Up to 30% of the fund’s capital will be directly invested in crypto tokens, with the remaining funds allocated to financial services stocks, which are expected to be affected by digital asset regulation, blockchain applications, and technological changes. This asset allocation strategy indicates that Galaxy believes regulatory changes and technological advancements in the crypto market will have profound impacts on traditional financial institutions, and these impacts can be captured through the stock market.

The hedge fund has secured $100 million in commitments from family offices, high-net-worth individuals, and some institutional investors, though the company may raise additional funds to expand its investment scale. Galaxy has confirmed to the Financial Times that it will conduct a seed round investment but declined to disclose specific amounts. This confidentiality is common in the hedge fund industry, as investment strategies and position sizes are often considered trade secrets.

End of the “Only Rising” Phase? Market Outlook from Hedge Fund Leaders

Joao Amaro, who is about to lead this new hedge fund, stated that the market is entering a different phase. “The ‘only rising’ phase of this cycle may be coming to an end,” he told the media, while remaining optimistic about major assets including Ethereum (ETH $2,968) and Solana (SOL $127.40). Amaro added that as long as stocks and gold remain resilient, Bitcoin (BTC $89,186) will still be significant in an environment where the Federal Reserve may cut interest rates.

What does the end of the “only rising” phase mean? Since early 2023, the crypto market experienced a strong rally, with Bitcoin rising from around $15,000 to over $120,000 at its October peak. During this phase, almost all mainstream crypto assets showed an upward trend, and investors could profit simply by holding. However, this one-sided bullish environment is changing, with prices beginning to show greater volatility and corrections.

This move comes after a recent correction in the crypto market. Bitcoin has fallen about 30% from its October high and is currently trading near $90,000. This significant correction is an opportune moment for hedge fund strategies, as traditional long-only funds would suffer losses in this environment, while hedge funds can profit or hedge risks through short positions.

Why Are Hedge Funds Optimistic About Financial Services Stocks?

In addition to crypto-native companies, Galaxy hedge fund is also focusing on traditional financial institutions. Amaro pointed out that the sell-off in payment and data companies (such as Fiserv) indicates that changes in regulation, the proliferation of blockchain, and advances in artificial intelligence are transforming the valuation of the entire financial services industry.

This observation reveals the deeper logic of Galaxy’s hedge fund strategy: the development of the crypto market will not only influence the prices of crypto assets themselves but also have systemic effects on traditional financial institutions. For example, Fiserv is one of the largest financial technology companies in the US, providing payment processing services for banks and merchants. As blockchain technology and crypto payments become more widespread, traditional payment processors may face challenges to their business models, which will be reflected in their stock prices.

The hedge fund’s strategy is to identify these traditional financial stocks affected by the crypto market and to conduct long and short operations based on regulatory changes, technology adoption speed, and market sentiment. For instance, when crypto regulation tightens, traditional bank stocks may benefit (long positions), while crypto-friendly fintech stocks may face pressure (short positions). Conversely, when regulation relaxes or blockchain applications accelerate, opposite positions can be taken.

Galaxy’s Aggressive Deployment in the Crypto Market

In September, Galaxy invested approximately $306 million to acquire Solana, bringing its total acquisitions to over $1.5 billion. This massive investment demonstrates Galaxy’s long-term optimism for the Solana ecosystem, which aligns with its bullish stance on SOL in the hedge fund.

Last week, Galaxy completed its first tokenized collateralized loan obligation (CLO) issuance, marking an important step in the transformation of the private credit market onto blockchain. The transaction, named Galaxy CLO 2025-1, was issued on the Avalanche platform, raising about $75 million, with $50 million from Grove, an institutional credit protocol within the Sky ecosystem.

The CLO supports Galaxy’s crypto lending business by purchasing excess collateralized Bitcoin and Ethereum-backed consumer loans issued by Arch Lending, with a scalable size of up to $200 million. These bonds are issued and tokenized via INX, with custody and real-time collateral tracking handled by Anchorage Digital Bank.

These actions demonstrate Galaxy’s multi-layered deepening of its crypto market deployment: through trading and investing via hedge funds, acquiring strategic assets through acquisitions, and expanding the bridge between traditional finance and crypto markets via tokenized products. This comprehensive strategy makes Galaxy one of the most aggressive institutional players in the crypto finance space.

Implications of Hedge Fund Strategies for Retail Investors

Galaxy’s decision to launch a hedge fund provides important market signals for retail investors. When institutions start adopting long-short strategies instead of purely long positions, it usually indicates an expectation that the market will enter a phase of higher volatility and two-way fluctuations. Retail investors can draw the following lessons:

The end of the one-sided rally: If the market remains in the “only rising” phase, institutions have no incentive to launch hedge funds, as simple long strategies can generate maximum returns. The launch of a hedge fund suggests that institutions anticipate more declines and volatility ahead.

Focus on risk management: The core of hedge funds is risk management, using long-short combinations to reduce risks in a one-sided market. Retail investors should also consider adding hedging tools to their portfolios, such as stablecoins, options strategies, or diversification.

Monitor the link between traditional finance and crypto: The fact that 70% of Galaxy hedge fund’s capital is invested in financial services stocks indicates increasing correlation between crypto markets and traditional finance. Retail investors should pay attention to regulatory changes, blockchain applications, and developments in traditional financial institutions.