Bitcoin trapped in fragile trading as hedge funds pivot to cash
The token is down about 50% from an all-time high of almost US$127,000 reached in early October
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[NEW YORK] Bitcoin settled into a narrow trading range with investors still seeking direction almost two weeks after a market collapse that wiped out the last remnants of gains registered since Donald Trump won re-election.
The downturn appears to have spurred a growing number of crypto hedge funds to pile into cash, underscoring how deeply the US$2 trillion post-October crash rout has shaken professional investors and how elusive conviction remains heading into 2026.
“Bitcoin has found a new range in the mid-60s, as it chops around with no real directional conviction,” said Bohan Jiang, senior derivatives trader at FalconX.
The notoriously volatile cryptocurrency traded in a range of less than 3 per cent on Thursday (Feb 19), and was little changed at around US$67,000 during New York trading hours. On Feb 6, Bitcoin tumbled as much as 13 per cent, the most in about four years. The token is down about 50 per cent from an all-time high of almost US$127,000 reached in early October.
The volatility spike on Feb 6 has now subsided, said Paul Howard, senior director at market maker Wincent, adding that “declining implied volatility and selective spot ETF demand on-chain suggests that leverage has been reduced”.
Cryptocurrencies have remained fragile since a wave of liquidations in October eroded market confidence, with Bitcoin plunging 24 per cent in the three months ended Dec 31, its steepest decline since 2022, weighing on trading volumes across digital-asset markets.
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A growing number of managers moved to cut risk in the fourth quarter as risk-reward profiles deteriorated, according to industry surveys by Crypto Insights Group. Some funds increased cash allocations, while others – bound by mandates requiring them to stay fully invested – shifted into more defensive positions instead.
“As the risk-reward started looking unfavourable in Q4, we de-risked 40 per cent of the portfolio,” Sigil Fund wrote in a note, adding that it was the first time in the fund’s history that it had zero exposure to both Bitcoin and Ethereum.
Hedge funds have long sought to profit from the difference with the so-called basis trade, whereby they buy Bitcoin in the spot market or proxies such as Bitcoin ETFs and sell long-dated futures to lock in the discrepancy between the two prices while sentiment remained bullish. That trade has become unprofitable since the slide in the price of Bitcoin.
Managers are prioritising capital preservation and flexibility, with many broadening mandates to include crypto-adjacent equities – a shift from earlier surveys, when equities were peripheral, according to Crypto Insights Group.
“Elevated cash buffers suggest many are waiting for clearer macro signals, regulatory catalysts or a durable revival in flows before redeploying into higher-beta tokens,” the group added. BLOOMBERG
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