Galaxy Hedge Fund Launches $100M Bold Strategy to Capitalize on Crypto Volatility

In a significant move that underscores the maturation of digital asset markets, Galaxy Digital, the firm founded by billionaire investor Mike Novogratz, is preparing to launch a $100 million hedge fund designed to profit from both rising and falling cryptocurrency prices. This strategic pivot, first reported by the Financial Times on Wednesday, arrives as industry leaders signal the potential end of crypto’s historic ‘up-only’ market cycles. The fund, set for a first-quarter launch, represents a sophisticated approach to navigating the increasing correlation between digital assets and traditional financial equities.

Galaxy Hedge Fund Details and Strategic Allocation

Galaxy’s new fund structure explicitly targets a dual-asset strategy. According to the Financial Times report, the firm will deploy capital into both digital tokens and traditional financial services stocks. Specifically, the fund will allocate up to 30% of its capital directly to cryptocurrencies. Consequently, the remaining majority will flow into equities of companies within the financial infrastructure sector. These traditional stocks are selected based on their expected sensitivity to three key drivers: evolving digital asset regulation, accelerating blockchain adoption, and relentless technological change, particularly in artificial intelligence.

The fund has already secured $100 million in commitments from a consortium of family offices, high-net-worth individuals, and select institutional investors. Galaxy confirmed it will make a seed investment into the strategy, though the precise amount remains undisclosed. This capital raise demonstrates robust early interest in a more nuanced crypto investment vehicle that moves beyond simple directional bets.

Navigating the End of the ‘Up-Only’ Crypto Cycle

Joe Armao, the veteran portfolio manager tapped to lead the new fund, provided crucial context for this strategic shift. He told the Financial Times that the market is entering a distinctly different phase. “The ‘up only’ part of this cycle is potentially coming to an end,” Armao stated. This assessment aligns with recent market performance. For instance, Bitcoin has retreated approximately 30% from its October peak and is currently trading near the $90,000 level. Furthermore, Bitcoin’s price has declined 12% over the past year, highlighting increased volatility and a break from previous parabolic trends.

Despite this cyclical shift, Armao maintains a constructive outlook on major crypto assets. He specifically cited Ethereum (ETH) and Solana (SOL) as holding positive long-term prospects. Regarding Bitcoin, he argued its relevance persists, especially in a macroeconomic environment shaped by potential interest rate cuts from the U.S. Federal Reserve. However, this relevance is contingent on the continued resilience of traditional equities and gold as alternative stores of value.

Beyond Crypto: Targeting Traditional Financial Disruption

A critical component of Galaxy’s thesis extends beyond native crypto firms. The fund will actively monitor and take positions in traditional financial players undergoing valuation shifts. Armao pointed to recent sell-offs in established payments and data companies like Fiserv as potential opportunities. He contends that the converging forces of regulatory change, blockchain integration, and AI advancement are fundamentally recalibrating valuations across the entire financial services landscape. Therefore, the fund is positioned not merely as a crypto fund but as a technology-driven financial sector fund.

Galaxy’s Expanding Ecosystem and Recent Activity

This hedge fund launch is not an isolated event but part of Galaxy Digital’s broader expansion. The firm has been actively accumulating assets, notably executing a significant purchase of around $306 million worth of Solana tokens in September. This transaction extended a buying spree that has totaled more than $1.5 billion, showcasing the firm’s substantial conviction and capital deployment capabilities.

Simultaneously, Galaxy continues to innovate in crypto capital markets. Just last week, the firm completed its first tokenized collateralized loan obligation (CLO), named Galaxy CLO 2025-1, issued on the Avalanche blockchain. This deal finances about $75 million in loans currently, with an anchor investment from Grove, an institutional credit protocol. The CLO supports Galaxy’s lending arm by purchasing overcollateralized Bitcoin and Ether-backed consumer loans, with a capacity to expand to $200 million. This initiative marks a concrete step toward bringing private credit markets onto blockchain rails, demonstrating Galaxy’s role as an infrastructure builder.

Market Context and Regulatory Landscape

The launch occurs amidst a complex regulatory environment. Galaxy has previously expressed views on proposed legislation, cautioning that certain Senate crypto bills could risk expanding Treasury surveillance authority. This regulatory uncertainty forms a key part of the investment landscape the new fund must navigate. The strategy to allocate to traditional financial stocks likely represents a hedge against prolonged regulatory headwinds for pure-play crypto companies, while still maintaining exposure to the sector’s growth through its enabling infrastructure.

Conclusion

Galaxy Digital’s planned $100 million hedge fund represents a pivotal evolution in institutional crypto investment strategy. By structuring a vehicle to take both long and short positions across digital assets and correlated traditional equities, Galaxy is preparing for a more complex, mature, and potentially less unidirectional market phase. The fund’s focus on financial infrastructure companies affected by blockchain and AI underscores a sophisticated thesis that extends far beyond simple token price speculation. Ultimately, this move signals that leading digital asset firms are building diversified, resilient strategies designed to generate alpha through all market conditions, solidifying crypto’s integration into the broader global financial system.

FAQs

Q1: What is the primary goal of Galaxy Digital’s new hedge fund?
The primary goal is to generate returns by taking both long (betting on price increases) and short (betting on price decreases) positions in cryptocurrencies and traditional financial stocks, capitalizing on volatility and sector-wide disruption.

Q2: How much of the fund will be invested directly in cryptocurrencies?
Up to 30% of the fund’s $100 million in capital will be allocated directly to crypto tokens. The remaining capital will target equities in the financial services sector.

Q3: What does ‘the end of the up-only cycle’ mean?
This phrase, used by fund manager Joe Armao, suggests the market environment where cryptocurrency prices predominantly rise in long bull runs may be changing. It indicates an expectation of increased volatility, sharper corrections, and a need for strategies that can profit in both rising and falling markets.

Q4: Who is providing the capital for this fund?
The $100 million in commitments has come from family offices, high-net-worth individuals, and select institutional investors. Galaxy Digital itself will also act as a seed investor.

Q5: How does this fund relate to Galaxy’s other business activities?
The fund complements Galaxy’s broader ecosystem, which includes asset management, trading, investment banking, and mining services. It leverages the firm’s market expertise and follows recent activities like large-scale token purchases and pioneering tokenized credit products.