Why Crypto Traders Are Ditching Big Bets for Safer, Smarter Strategies Amid Volatility Surge

Crypto funds shifted to market-neutral trades as volatility punished directional bets and triggered a fourth straight month of losses.

Crypto funds opened 2026 with losses and defensive positioning, according to a February 18 survey by Presto Research and Otos Data.

The report shows investors shifting toward relative-value and market-neutral trades as macro uncertainty and price swings weigh on directional bets.

Market-Neutral Funds Outperform as Directional Strategies Sink

According to Presto’s survey, all liquid crypto hedge funds dipped by an average of 1.49% last month. The losses extended a difficult stretch for active managers, marking the fourth consecutive month of negative equally weighted performance across both fundamental and quantitative categories, a sequence not seen since late 2018 and early 2019.

The dispersion within the numbers tells a clearer story, with fundamental funds dropping 3.01% in January, while quantitative funds fell 3.51%. On the other hand, Presto revealed that market-neutral funds, which aim to profit from price differences rather than market direction, gained about 1.6%. Over six months, those same neutral strategies are up nearly 5% while fundamental funds are down more than 24%.

During that same period, Bitcoin (BTC) has fallen approximately 31%, Ethereum (ETH) 23%, and Solana (SOL) 47%.

Analysis by other market watchers supports the fragile tone, with data from Alphractal showing that Bitcoin was trading in a stress zone where weaker holders tend to sell while long-term investors accumulate. The firm’s founder, Joao Wedson, said long-term holder profit levels are still positive, a sign the market may not yet be at a final turning point.

Positioning Data Points to Defensive Posture, Not Panic

The Presto survey’s flow analysis shows a clear behavioral arc through January. The month opened with constructive positioning and call buying, but as rallies failed, traders rotated into tactical fade structures. By the third week, downside hedging became dominant, as ETF flows fluctuated, with periods of inflow offset by miner distribution and whale selling. Meanwhile, corporate accumulation remained present but insufficient to offset broader risk reduction.

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Importantly, the report noted that positioning into the month-end was not outright capitulative. The analysts stated that while protection was in place, the leverage looked more orderly compared to the chaotic reset event in October 2025.

The absence of broad panic suggests that stress is building in pockets rather than being expressed as systemic liquidation. This distinction matters as the market assesses whether January represents continuation or exhaustion.

The researchers advised that until policy clarity improves or a structural crypto-specific catalyst emerges, rallies are likely to fade, volatility will stay reactive to headline risk, and adaptability rather than conviction will determine survival in the first quarter of 2026.

Whether January marked a continuation of the bear trend or the exhaustion phase of selling pressure remains an open question. However, at present, the data indicate that strategies that prioritize relative value over directional conviction are successfully navigating the current challenges.