Crypto hedge funds faced a challenging start to the year 2026, suffering losses and shifting strategies towards market-neutral positions due to increased volatility. A report from Presto Research and Otos Data issued on February 18 conveys that investors are now more inclined to adopt relative-value approaches as uncertainty in the macroeconomic environment and price fluctuations adversely affect directional trading bets.

Market-Neutral Funds Outperform as Directional Strategies Sink

Recent data indicates that all liquid crypto hedge funds recorded an average decline of 1.49% last month, extending a troubling trend that has seen four months of consecutive losses in active management. This scenario marks a downturn not observed since late 2018 to early 2019. In specifics, fundamental funds suffered a drop of 3.01%, while quantitative funds fell by 3.51%. Conversely, market-neutral strategies, instead of speculating on market trends, managed to achieve a gain of approximately 1.6% over the same period, with almost a 5% increase over the last six months.

Amid these dynamics, Bitcoin (BTC) saw a decrease of about 31%, Ethereum (ETH) fell 23%, and Solana (SOL) witnessed a staggering 47% drop.

Analysis from various market analysts further supports this fragile outlook. Data from Alphractal shows Bitcoin trading within a critical stress zone indicative of market anxiety, as less experienced holders tend to offload their holdings while long-term investors continue to accumulate. Joao Wedson, the founder of Alphractal, noted that profit levels for long-term holders remain positive, indicating that the market may not have reached a definitive turning point yet.

Defensive Positioning Instead of Panic

The Presto survey outlined a pronounced behavioral shift in January. Initially, traders maintained a proactive stance with call buying, yet as upward movements faltered, a tactical adjustment occurred, transitioning to more defensive positions. By the third week, there was a noticeable equilibrium shift towards downside hedging, coinciding with ETF flow fluctuations characterized by varying inflows, miner selling, and whale activity. Corporate accumulation did persist, though it lacked the capacity to counterbalance broad risk mitigation.

The report highlights that the positioning towards the end of the month does not reflect outright capitulation. Analysts have observed that while protective measures are in place, the leveraged atmosphere is comparatively stable, in stark contrast to the chaotic resets witnessed in October 2025. The lack of widespread panic implies that stress is occurring in isolated segments rather than triggering systemic liquidation.

This distinction is crucial as the crypto market evaluates whether January marks a continuation of the bear trend or signifies the exhaustion of sales pressure. From current data, it appears that strategies emphasizing relative value are effectively maneuvering through existing challenges.