Hard Times for ‘Smart Money’ as Crypto Hedge Funds Record Worst Year Since FTX
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Directional crypto hedge funds faced a 23% decline in 2025, their worst yearly performance since 2022. A $2B October event and basis trade decay eliminated arbitrage profits for institutional funds, while only market-neutral strategies achieved a 14.4% return by leveraging risk-hedging tactics amid low liquidity.
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- Directional crypto hedge funds slumped 23% in 2025, marking the worst year since the 2022 crash.
- The $2B Oct 10 ADL event and basis trade decay wiped out arbitrage gains for institutional funds.
- Market-neutral funds managed a 14.4% return by staying hedged against 2025’s thin liquidity bursts.
With less than two weeks to the end of 2025, crypto hedge funds are about to record their worst annual performance since 2022. Professional managers tracking market momentum and underlying fundamentals have seen their returns spiral into negative territory through November.
In a sharp split from the broader rally, only market-neutral strategies managed to eke out gains, fueled by a move toward risk-hedged vehicles as the “easy money” era of crypto arbitrage vanishes.
Explainer: The Three Faces of Crypto Hedge Funds
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