Falling yields and volatility are pushing crypto hedge funds toward commodities and macro trades on blockchain venues.
Crypto hedge funds are starting to look less like crypto specialists and more like cross-asset trading desks as profits from Bitcoin and token strategies continue to shrink.
The same infrastructure built for round-the-clock crypto trading is now being used to bet on oil, gold and stock indexes, Bloomberg reports citing trading data Hyperliquid and Ostium.
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The shift comes as easy gains in crypto markets fade. Strategies like the basis trade, which once delivered high double-digit returns, are now yielding closer to 5% to 6%, the report reads. At the same time, stablecoin lending has dropped from around 30% to less than 5%, per data from Aave.
From Tokens to Commodities
On decentralized perpetual exchange like Hyperliquid and Ostium, traditional assets are taking a growing share of activity. Contracts tied to commodities made up about 30% of volume on Hyperliquid in March, while on Ostium that figure has exceeded 90% for much of the past year.
That change is showing up in how funds allocate capital. Some managers are still cautious, putting less than 5% into these trades for now, but expect that to climb toward 10% to 20% as opportunities expand.
Returns are Shifting
Data from Crypto Insights Group, a research firm tracking hedge fund performance, shows just how uneven crypto strategies have become.
Directional strategies delivered strong triple-digit returns in 2020. However, they turned negative in 2022, with some losses reaching roughly 50% to 70%, the report notes.
Even in the recovery, gains look shy. By 2023 and 2024, directional strategies were generating around 60% to 110% annually, far below earlier peaks.
- That gap is pushing funds to look elsewhere. Some firms report making about 1% to 3% per month from arbitrage trades tied to real-world assets, or RWAs. That compares with roughly 0.5% from traditional crypto strategies.
Instead of betting on where the Bitcoin price goes next or trying to time when Bitcoin price reaches a new milestone, funds are now refocusing on price gaps between assets.
As Bloomberg notes, one example involved shorting silver while going long copper, capturing funding fees that had climbed past 250% on an annualized basis as bullish positioning became overcrowded.
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