Relative value strategies beat directional bets as crypto volatility bites

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

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

The report shows that investors are shifting to relative value and market-neutral trades as macro uncertainty and price volatility weigh on directional investments.

Market neutral funds perform better when directional strategies sink

According to Presto’s research, all liquid crypto hedge funds baptized last month with an average of 1.49%. The losses marked a difficult period for active managers, marking the fourth straight month of negative equal-weighted performance in both fundamental and quantitative categories, a streak not seen since late 2018 and early 2019.

The spread within the figures tells a clearer story: fundamental funds fell 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 differentials rather than market direction, rose about 1.6%. Over six months, those same neutral strategies are up almost 5%, while fundamental funds are down more than 24%.

During that same period, Bitcoin (BTC) is down about 31%, Ethereum (ETH) is down 23%, and Solana (SOL) is down 47%.

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

Data positioning indicates a defensive posture, not panic

The flow analysis of the Presto study shows a clear behavioral arc through January. The month started with constructive positioning and call buying, but as rallies failed, traders turned to tactical fade structures. By the third week, downside hedging became dominant as ETF flows fluctuated, with periods of inflows offset by miner distributions and whale sales. Meanwhile, business accumulation remained present, but was insufficient to offset the broader risk reduction.

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

The lack of widespread panic suggests that tension is building in pockets, rather than manifesting itself as a systemic liquidation. This distinction is important as the market assesses whether January means continuation or exhaustion.

The researchers recommended that until policy clarity improves or a structural crypto-specific catalyst emerges, rallies are likely to fade, volatility will remain reactive to the high 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. Currently, however, the data suggests that strategies that prioritize relative value over directional conviction are successfully meeting current challenges.