At a Glance
- Galaxy Digital is launching a $100 million hedge fund in Q1 to trade crypto up and down.
- The fund will allocate up to 30 % to crypto tokens, the rest to financial-services stocks.
- Bitcoin has dropped 30 % from its October peak, creating new trading opportunities.
Why it matters:
Investors now have a new vehicle that can profit from both rising and falling crypto prices while also gaining exposure to traditional financial infrastructure.
Galaxy Digital, the digital-asset firm founded by Mike Novogratz, announced plans to launch a $100 million hedge fund that will take long and short positions in both crypto tokens and traditional equities. The fund, set to debut in the first quarter, aims to capture profit from market volatility while also positioning itself in financial-services stocks that are likely to be affected by regulatory and technological shifts. This move comes as Bitcoin has fallen about 30 % from its October peak, and the broader crypto market is in a phase of adjustment.
Galaxy’s New $100 Million Hedge Fund
Structure and Allocation
According to the Financial Times, the fund will be structured to allow both long and short bets across digital assets and equities tied to the financial infrastructure. Up to 30 % of the capital will be directly allocated to crypto tokens, while the remaining 70 % will be deployed into stocks of financial-services companies expected to be influenced by digital-asset regulation, blockchain adoption and technological change.
| Asset Class | Allocation |
|---|---|
| Crypto Tokens | 30 % |
| Financial-Services Stocks | 70 % |
Galaxy has already secured $100 million in commitments from family offices, high-net-worth individuals and select institutional investors, though the company may open the strategy with additional capital.
Market Outlook
Joe Armao, who will lead the new fund, said the market is entering a different phase. “The ‘up only’ part of this cycle is potentially coming to an end,” he told the outlet, while maintaining a positive outlook on major assets including Ethereum (ETH) and Solana (SOL). Armao added that Bitcoin (BTC) remains relevant in an environment shaped by potential US Federal Reserve rate cuts, provided equities and gold remain resilient.
Strategic Focus on Financial Services
Armao cited sell-offs in payments and data companies such as Fiserv, arguing that shifting regulation, blockchain adoption and advances in artificial intelligence are changing valuations across financial services. This focus aligns with the fund’s intent to capitalize on structural shifts that may benefit companies tied to digital-asset infrastructure.
Tokenized CLO Expansion
Galaxy completed its first tokenized collateralized loan obligation (CLO), called Galaxy CLO 2025-1, last week. The CLO was issued on Avalanche and has financed about $75 million in loans to date. It is anchored by a $50 million allocation from Grove, an institutional credit protocol within the Sky ecosystem.
| CLO Component | Details |
|---|---|
| Issue Platform | Avalanche |
| Total Loans Financed | $75 million |
| Grove Allocation | $50 million |
| Originator | Arch Lending |
| Expansion Capacity | Up to $200 million |
The CLO supports Galaxy’s crypto lending arm by purchasing over-collateralized Bitcoin and Ether-backed consumer loans. The bonds were issued and tokenized via INX, with custody and real-time collateral tracking handled by Anchorage Digital Bank.
Market Context
Bitcoin has fallen about 30 % from its October peak and is trading near $90 000. It is down 12 % over the past year, according to CoinMarketCap. In September, Galaxy bought around $306 million worth of Solana, extending a buying spree that has totaled more than $1.5 billion. The recent pullback in the cryptocurrency market has prompted Galaxy to diversify its strategy.
Why a Hedge Fund Matters
A hedge fund structure allows Galaxy to take both long and short positions, providing a hedge against market swings while seeking alpha. By allocating a significant portion to financial-services stocks, the fund taps into sectors that may benefit from increased regulatory clarity and technology adoption. This dual exposure could appeal to investors looking for diversification beyond pure crypto.
Potential Risks and Rewards
- Reward: Exposure to upside in both crypto tokens and financial-services equities; potential to profit during volatile periods.
- Risk: Market downturns could erode token holdings; regulatory changes could impact financial-services valuations.
- Risk: Concentration in specific sectors (e.g., payments, data) may amplify volatility.
- Reward: Hedge fund structure offers flexibility to adjust positions rapidly.
Investor Profile
The fund targets family offices, high-net-worth individuals and institutional investors who are comfortable with leveraged exposure to both crypto and traditional equities. The seed investment commitment indicates confidence from seasoned investors, while additional capital may be raised to meet demand.
Regulatory Landscape
Digital-asset regulation is evolving, with potential US Federal Reserve rate cuts influencing market sentiment. Blockchain adoption and AI advancements are reshaping valuations in financial services. The fund’s strategy is designed to navigate these regulatory and technological shifts.
Key Takeaways
- Galaxy Digital is launching a $100 million hedge fund that will trade crypto up and down while also investing in financial-services stocks.
- The fund will allocate up to 30 % to crypto tokens and the remaining 70 % to equities tied to financial infrastructure.
- The launch follows a 30 % drop in Bitcoin and a significant Solana purchase, prompting a diversification strategy.
- Galaxy’s tokenized CLO, Galaxy CLO 2025-1, has financed $75 million in loans and is backed by a $50 million allocation from Grove.
- The fund’s structure offers potential rewards from volatility and diversification, but also carries risks from market downturns and regulatory changes.