Galaxy Launches $100M Crypto Hedge Fund Amid Market Volatility

The new Galaxy fund represents a calculated departure from pure-play crypto speculation. According to a Financial Times report, the fund will allocate up to 30% of its assets to crypto tokens, with the remaining 70% invested in financial services stocks that Galaxy believes will be impacted by the adoption of digital asset technologies and evolving regulations. This structure aims to capture alpha from the convergence of traditional finance (TradFi) and decentralized finance (DeFi). Paul Howard, senior director at crypto trading firm Wincent, told Decrypt that this mix reflects where real returns are emerging: “bringing financial services on-chain and digital assets into traditional businesses.”

Howard emphasized the fund’s prudent approach to token selection, suggesting it will back “a smaller handful of crypto tokens with demonstrable success and partnerships,” many tied to tangible use cases like stablecoins or tokenized assets. The fund has already secured $100 million in commitments from family offices, high-net-worth investors, and some larger institutions, with Galaxy itself providing a seed investment of an undisclosed size. Fund head Joe Armao framed the strategy as one that can profit from finding “winning and losing companies,” allowing investors to play “disrupters, winning and losing themes across financial services.”

The fund’s launch coincides with a period of pronounced turbulence for digital assets. Bitcoin is currently trading around $88,375, down 3.1% on the day and 7.1% over the past week, according to CoinGecko data. This decline follows a peak of $126,080 in October, and recent price action has been exacerbated by geopolitical friction. Bitcoin dropped from approximately $95,000 last Friday after former President Trump threatened 10% tariffs on eight European countries, with measures set to escalate to 25% by June 1, prompting European officials to signal retaliation.

Joe Armao told the FT that the “‘up only’ phase of this cycle is potentially coming to an end,” acknowledging a more challenging environment. However, he remains bullish on major cryptocurrencies like Bitcoin, Ethereum (ETH), and Solana (SOL). “Bitcoin can’t be ignored this year in a backdrop of further [Federal Reserve interest rate] cuts, assuming equity markets and gold stay healthy,” Armao stated. This sentiment is echoed by analysis from QCP Capital, which noted in a recent report that Bitcoin “is trading like a high-beta risk asset, highly sensitive to rates, geopolitics, and cross-market volatility,” and is likely to stay “reactive rather than directional” until clearer policy signals emerge.

Market sentiment appears mixed. On the prediction market Myriad, owned by Decrypt’s parent company Dastan, users now place a 70% chance on Bitcoin’s next major move taking it to $100,000 rather than $69,000—though this is down from highs of 84% earlier in the week. Mike Novogratz himself tweeted that Bitcoin’s current price is “disappointing,” adding that it needs to reclaim the $100,000 to $103,000 range to regain its upward trend, a prediction he believes will happen “in time.”

Galaxy’s hedge fund initiative signals a strategic pivot for the firm as digital asset markets mature and exhibit stronger correlations with traditional financial risk factors. The fund’s ability to take both long and short positions is a direct response to increased volatility and the potential for downturns, moving beyond the one-directional bullish bets that characterized earlier market cycles. This structure is designed to generate returns regardless of broader market direction by identifying both beneficiaries and casualties of financial sector disruption.

This nuanced approach contrasts with, yet coexists alongside, continued conviction from major corporate buyers. Notably, Michael Saylor’s MicroStrategy executed one of its largest purchases in nearly a year on Tuesday, buying 22,300 Bitcoin for $2.1 billion even as the asset’s price wavered. Galaxy’s strategy, therefore, reflects a broader industry segmentation: between entities doubling down on pure accumulation and those, like Galaxy, adopting sophisticated, multi-asset strategies to navigate a market that QCP Capital says is behaving less as a hedge and more as a risk-on, reactive asset.