Points of Focus  

• Bitcoin’s 20% plus flash crash this week, caught many crypto funds off guard, with managers citing rapid sentiment flip and leverage unwind.  
• Non-BTC tokens have been in a “rolling bear market” since late 2024.
• Managers emphasize fundamentals, revenue-generating assets, and risk management.

Bitcoin’s sudden plunge this week did not surprise everyone, but the speed did. Multiple crypto fund managers reported that the 20%+ drop, which was followed by a partial rebound, unfolded faster than anticipated, driven by forced liquidations, ETF outflows, and a broader risk-off macro environment. “I don’t think anyone really thought that this much capitulation would happen this quickly,” said Zaheer Ebtikar, founder and CIO of Split Capital.

A “necessary” purge for real utility emergence

However, the weakness is not new. Cosmo Jiang, general partner at Pantera Capital overseeing liquid token strategies, described the altcoin market as being in a bear phase since December 2024, a “rolling bear market” that accelerated as stress spread from overstretched TradFi themes to crypto. 

🚨$5.7 billion in short positions would be liquidated if Bitcoin reaches $80,500. pic.twitter.com/XcvGbdoBz0

— DustyBC Crypto (@TheDustyBC) February 8, 2026

Ray Hindi, co-founder and managing partner of L1D AG, added that the downturn reflects a necessary cleansing: “Large parts of the crypto markets are structurally destined for zero and that’s ultimately healthy.” He argued the shakeout purges excess and forces real utility to surface, even as high-conviction assets get dragged lower.

Performance divergence by strategy  

How funds performed in 2025 depended heavily on design, not market direction. Andy Martinez, founder and CEO of Crypto Insights Group, noted directional strategies (betting up or down) fell ~11% on average, with fundamental long/short funds hit hardest at -31%. 

Quant directional funds gained ~12%, while market-neutral strategies delivered positive returns of 14.6%. Kenneth Heinz of Hedge Fund Research highlighted quant and DeFi strategies as well-positioned for volatility.

Sunday pump = Monday Dump. pic.twitter.com/GxRixhvzvI

— Ash Crypto (@AshCrypto) February 9, 2026

Hindi said the weakest results came from funds betting on a leveraged altcoin season repeat. Stronger performers ran rigorous fundamental processes, bridged crypto and TradFi, or de-risked early. “We’re drawn to fundamental, conviction-driven approaches,” he said, noting high-conviction managers remain positive YTD by focusing on scarce, high-quality assets, even amid sharp short-term volatility.

Expectations for widespread altcoin outperformance remain muted. Joscha Kuplewatzky of Wintermute Ventures said the market is too late in the cycle for broad rallies, predicting short, sector-specific bursts unless retail returns. Mathijs van Esch of Maven 11 and Ebtikar agreed that funds are shifting toward revenue-generating tokens, clearer value accrual, and multi-strategy playbooks. Hindi called relying on a 2021-style alt season “irresponsible and a losing strategy,” with alpha now coming from idiosyncratic selection.

Overall takeaway

Crypto liquid funds are learning the hard way what traditional markets have known for decades, that leverage and overcrowding don’t always have the ending most people expect. Bitcoin’s crash exposed the fragility of directional bets and altcoin rotation hopes, but it also highlighted the edge of disciplined, fundamentals-driven managers. 

If you’re over 18 years old,

You can’t afford to miss this.

The next 6–12 months are the most important of your life.

Why?

Because the market is setting up the greatest wealth transfer in history.

Most people think the pain is over.

THEY ARE WRONG.

Stocks are still at the…

— NoLimit (@NoLimitGains) February 8, 2026

Performance dispersion, market-neutral up by double digits while directional funds bleed, all these show that strategy matters more than narrative at the moment. For investors, the takeaway is clear. In this environment, conviction must be backed by revenue, scarcity, and risk controls, not hype. The “rolling bear” in alts may persist, but it could also create generational opportunities for those who know how to separate signal from noise. 

Funds that adapt, focusing on yield, arb, and real utility, will likely come out on the other side, stronger. As for those chasing the next 2021 moonshot, it’ll be interesting to see how that pans out. In all, these are interesting times for everyone in the ecosystem and for the history of cryptocurrency, albeit for different reasons.