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Galaxy, the digital asset financial services firm founded by billionaire investor Mike Novogratz, is preparing to launch a $100 million hedge fund designed to profit from both rising and falling crypto markets. The move signals a strategic shift as the firm positions itself for a more complex phase of the digital asset cycle, moving beyond the “up-only” environment that has defined recent years.
Set to launch in the first quarter, the new hedge fund will deploy long and short strategies across cryptocurrencies and traditional financial stocks, according to a report by the Financial Times. Galaxy’s approach reflects growing investor demand for active risk management amid heightened volatility, regulatory uncertainty, and evolving macroeconomic conditions.
Galaxy Targets Two-Way Markets
Unlike traditional crypto funds that rely heavily on bullish price momentum, Galaxy’s new hedge fund is designed to generate returns regardless of market direction. The strategy will take both long and short positions across a diversified mix of assets, aiming to capitalize on price swings rather than sustained rallies.
Up to 30% of the fund’s capital will be allocated directly to crypto tokens, while the remainder will be invested in publicly traded financial services companies. These include firms involved in payments, data infrastructure, and technology that stand to be affected by blockchain adoption, digital asset regulation, and artificial intelligence.
The fund has already secured $100 million in commitments from family offices, high-net-worth individuals, and select institutional investors. Galaxy also confirmed it will provide a seed investment, though it declined to disclose the size of its contribution.
End of Up-Only Phase
Joe Armao, who will lead the new hedge fund, said the crypto market is entering a new phase marked by increased volatility and selective opportunities. According to Armao, the “up-only” portion of the current crypto cycle may be nearing its end, requiring investors to adopt more nuanced strategies.
Despite this shift, Galaxy remains constructive on major digital assets. Armao expressed continued confidence in Ethereum and Solana, while noting that Bitcoin remains well positioned in a macro environment that could see US Federal Reserve rate cuts, provided equities and gold continue to show resilience.
Bitcoin has fallen roughly 30% from its October peak and is trading near $90,000, underscoring the need for strategies that can navigate both corrections and recoveries.
Blending Crypto and Stocks
A distinguishing feature of Galaxy’s hedge fund is its hybrid exposure to both crypto-native assets and traditional equities. Rather than focusing solely on blockchain startups or tokens, the strategy will target established financial firms undergoing structural changes driven by technology and regulation.
Armao highlighted recent sell-offs in payments and data companies such as Fiserv as potential opportunities. He argued that shifting regulatory frameworks, increasing blockchain integration, and advances in artificial intelligence are reshaping valuations across the financial services sector.
By combining crypto exposure with traditional financial stocks, Galaxy aims to capture cross-market inefficiencies that emerge as digital assets increasingly intersect with legacy finance.
Institutional Demand Remains Strong
The successful fundraising effort suggests that institutional appetite for sophisticated crypto investment strategies remains intact, even after recent market pullbacks. Family offices and high-net-worth investors, in particular, are seeking hedge fund-style approaches that offer downside protection while maintaining upside potential.
Galaxy’s move reflects a broader trend in the digital asset industry, where firms are expanding beyond passive exposure to Bitcoin and Ether in favor of active trading, arbitrage, and relative value strategies.
This evolution mirrors developments in traditional hedge funds, where volatility is often viewed as an opportunity rather than a threat.
Galaxy Expands Tokenization Efforts
The hedge fund launch comes amid a series of strategic initiatives by Galaxy aimed at bridging traditional finance and blockchain technology. Last week, the firm completed its first tokenized collateralized loan obligation (CLO) on the Avalanche blockchain.
The deal, known as Galaxy CLO 2025-1, has financed approximately $75 million in loans to date, anchored by a $50 million allocation from Grove, an institutional credit protocol within the Sky ecosystem. The CLO supports Galaxy’s crypto lending arm by purchasing overcollateralized Bitcoin- and Ether-backed consumer loans originated by Arch Lending.
Issued and tokenized via INX, the bonds are custodied by Anchorage Digital Bank, which also provides real-time collateral monitoring. The structure has the capacity to expand to $200 million, highlighting Galaxy’s ambitions in tokenized private credit markets.
Positioning for Market Maturity
Galaxy’s $100 million hedge fund underscores the growing maturity of crypto markets. As volatility becomes a defining feature rather than a temporary phase, asset managers are increasingly adopting tools long used in traditional finance to navigate uncertainty.
By combining long and short positions, crypto exposure, and traditional equities, Galaxy is positioning itself to remain competitive in a market where simple directional bets may no longer be sufficient. For investors, the fund represents a bet not just on crypto prices, but on the continued convergence of digital assets and global financial infrastructure.