In the first quarter of 2026, Galaxy Group, led by Mike Novogratz, is preparing to make a significant bet in the long-dormant cryptocurrency market with a new hedge fund targeting a size of $100 million entering the final stages of preparation. Unlike the "purely on-chain All in" products that dominated the previous cycle, Galaxy has chosen a structure that is clearly more moderate and carries political and compliance implications this time: approximately 30% allocated to cryptocurrency tokens, with the remaining 70% invested in financial services stocks. After enduring a long crypto winter and with regulatory boundaries still being redrawn, this fund attempts to tie on-chain volatility to traditional financial profits, betting on who can emerge as the true winner amid regulatory uncertainty and institutional changes. The article will explore this hybrid bet of "traditional finance + crypto assets," discussing whether it is Galaxy's survival-driven correction or a larger-scale positioning ahead of the cycle.
From Breaking the Ice to Betting in Circles
During the previous crypto bull market frenzy and the subsequent winter, Galaxy's situation was no different from most financial institutions centered on digital assets: when market liquidity surged, it benefited from both narrative and asset inflation; when prices deeply corrected and regulatory and public backlash intensified, business contraction and risk exposure also magnified. Public reports capture the company's experience of "expansion to contraction to reconstruction" alongside the entire industry, rather than specific financial figures and asset sizes, which have not been fully disclosed and should not be overly interpreted in the absence of information. Against this backdrop, Galaxy chose to launch its first hybrid strategy hedge fund after the crypto winter, shifting its chips from a single on-chain asset to a more complex structure of "on-chain + financially service stocks influenced by digital assets."
According to several Chinese crypto media outlets (including PANews, Jinse Finance, and Planet Daily), this fund aims for a target size of $100 million and plans to officially launch in the first quarter of 2026. Galaxy itself will provide a certain proportion of seed funding to demonstrate "interest alignment" with external investors. The specific amount of its own funds and the proportion of the total fund size has only been mentioned by a single source and lacks further public documentation, so it can only be vaguely referred to as "self-funded participation," without further breakdown. The timing is quite significant: on the eve of a major cycle marked by Bitcoin halving and the gradual formation of regulatory frameworks for digital assets in the U.S. and other major jurisdictions, Galaxy re-enters the fundraising and market narrative center with a hybrid hedge fund, a move that clearly carries intentions of brand repair and business line reconstruction.
For Galaxy, this product is not just a new business unit of $100 million, but more like a business card that redefines boundaries. On one hand, by incorporating a large proportion of financial services stocks into the product structure, it sends a signal to regulators and institutional investors that it is "actively approaching traditional finance and following a more familiar compliance path"; on the other hand, retaining 30% exposure to crypto tokens allows it to continue playing the role of "on-chain risk and innovation participant" in the narrative. This adjustment of posture between regulatory shadows and market opportunities is what Galaxy is attempting to achieve in its brand repositioning after the winter: no longer just a radical player of the pure crypto era, but trying to build a real bridge that can carry institutional funds between Wall Street and on-chain.
A Hedge Experiment of 30% On-Chain and 70% Wall Street
Allocating 30% of funds to cryptocurrency tokens and 70% to financial services stocks means that this fund deliberately distances itself structurally from traditional "pure crypto funds." Past crypto long-short hedges or multi-strategy funds often locked the vast majority of risk exposure on-chain, whether through combinations of spot and derivatives for hedging or engaging in relative value games between different tokens and sectors, essentially still being viewed as "crypto asset products." In contrast, Galaxy's choice to use over two-thirds of its funds to purchase stocks of traditional financial services companies in the secondary market aims to realize the profitability of digital asset technology, legal, and regulatory changes along the broader line of "financial infrastructure profitability."
Historically, the bull and bear cycles of crypto assets often exhibit extreme unidirectional characteristics: they can surge several times or even dozens of times in the short term when sentiment and liquidity resonate, while entering a winter, price halving and further halving is not uncommon. In comparison, the financial services sector, especially banks, brokers, and payment companies that are more strictly regulated, typically experience lower volatility and drawdown depths even during financial crises or significant interest rate fluctuations than mainstream crypto assets. However, on the other hand, these stocks are also highly dependent on macro variables, interest rate environments, and regulatory events, with their rise and fall logic being far more entangled than "industry narrative + capital leverage."
In this comparison, Galaxy's hybrid combination attempts to find a balance between two dimensions: first, by having a 70% position in financial services stocks, it builds a relatively traditional risk model-capturable base for the portfolio, keeping extreme drawdowns within a psychologically acceptable range for institutional investors; second, retaining 30% exposure to crypto tokens allows the fund to maintain sufficient upside elasticity in the next on-chain cycle, preserving potential sources of returns from "crypto beta + narrative premium." The advantage lies in that when the crypto market enters a period of extreme volatility, financial services stocks may not necessarily collapse simultaneously; conversely, when interest rates and regulations exert heavy pressure on traditional financial stocks, crypto assets may potentially perform relatively independently under the label of "alternative risk exposure." However, the shortcomings are also evident: in extreme scenarios, the two may not always achieve negative correlation or diversification, especially when macro systemic risks or regulatory black swan events occur, "crypto + financially impacted stocks" may likely face simultaneous pressure in sentiment and valuation.
The fund's public statements mention a focus on identifying "winners and losers" in the financial services sector. Behind this main line is an attempt to bet on the institutional distribution during the process of digital asset penetration into the financial system through the stock market. Those institutions that can successfully adapt to new technologies and expand new business lines under compliance requirements may gain stronger profit expectations and valuation premiums in their stock prices; while traditional institutions that are slow to respond in technology, compliance, or capital adequacy may more easily become targets for hedging or shorting under the dual pressure of tightening regulations and business erosion. What Galaxy aims to do is to map the changes in "on-chain infrastructure, custody, trading, payment, and clearing" to the profitability and regulatory positions of specific companies, allowing the growth originally reflected through tokens to partially migrate to the stock return curve.
Gray Charge Under Regulatory Clouds
At the time Galaxy launched this hybrid fund, the overall direction of regulation surrounding digital assets had become relatively clear, but there remained many blanks and gray areas regarding specific rules and implementation timelines. In the U.S., whether regarding the regulatory authority division for spot and derivatives exchanges or the disputes over the attributes of different types of tokens, it remains a focal point of tug-of-war between the market and legislative bodies; globally, from Europe's MiCA framework to the licensing systems provided by several Asian jurisdictions, a new regulatory system is taking shape, but the applicable boundaries for specific business models and product forms still need to be tested. Meanwhile, financial services companies significantly affected by changes in digital asset technology, law, and regulation—including trading platforms, custodians, payment and clearing service providers, as well as traditional banks and brokers that heavily integrate on-chain infrastructure in the backend—are also under more detailed scrutiny, and their regulatory burdens may continue to rise in the coming years.
In such an environment, bundling crypto tokens and financial services stocks into the same hedge fund is not only a structural innovation in asset allocation but also a challenge on the compliance path. For investors and regulatory bodies, such products are neither as easily classified as traditional single-strategy funds nor as clearly "risk-profiled" as pure crypto funds; they need to cover the high volatility and potential liquidity tightening risks of on-chain assets, as well as the dual macro and regulatory uncertainties faced by financial stocks in their risk disclosure documents. This means that product designers must leave room for explanations for possible extreme scenarios in advance: for example, when a key regulatory new rule simultaneously impacts both crypto trading and the revenue models of related financial services companies, the two core positions of the fund may be simultaneously squeezed in a short time.
On the surface, allocating 70% of assets to traditional financial services stocks seems to add a layer of "regulatory-friendly" buffer to the product, making its structure closer to that of mainstream hedge funds. However, a deeper risk lies in the fact that this "hybrid" design may create a double stomp in extreme scenarios: if new regulatory measures restrict both token trading or holding and impose additional capital requirements or business constraints on financial institutions highly tied to digital assets, then the two revenue curves of the fund may simultaneously enter a pressure zone, and the two types of assets originally hoped to diversify risk may instead amplify volatility along the sentiment, valuation, and liquidity transmission chain. Galaxy's design this time is, to some extent, a proactive charge in the gray area: it bets that regulators will ultimately choose to allow a type of hybrid asset product to exist under the premise of "controllable innovation" and "visible risks," rather than a one-size-fits-all withdrawal of risk exposure across the entire chain.
Why Family Offices and Institutional Money Are Willing to Follow
Although the details of the subscription structure have not been disclosed, the briefing has confirmed that this fund has already secured committed capital from family offices, high-net-worth individuals, and some institutional investors, but the specific proportion division and subscription rhythm among the three types of investors are currently unknown. For these funds, after experiencing the cycle of the previous crypto bull and bear markets, how to continue to maintain participation in the digital asset field while limiting overall portfolio risk is a practical and urgent issue. In the context of regulatory attitudes not yet fully settled and compliance pressures continuously increasing, directly holding tokens or investing in pure crypto funds has become more difficult for many traditional funds to pass through internal compliance processes, while completely exiting this track means giving up potential high growth and asset diversification opportunities.
What Galaxy attempts to provide them is a path between the two: by investing in a hedge fund that structurally binds "regulated financial services stocks + crypto beta," investors can have a holding target that "resembles a traditional product" on both the accounting and compliance levels, while still capturing some of the returns brought by on-chain assets and industry structural changes in terms of substantive risk exposure. For family offices and high-net-worth individuals, this product form can retain exposure to emerging asset classes in a more restrained manner in family wealth inheritance and intergenerational asset allocation; for institutional investors, especially those that have already built alternative asset investment frameworks in their internal processes, this type of fund can be seen as a structural upgrade of the "digital finance sector" within the existing framework, rather than a new, difficult-to-classify source of risk.
In this process, Galaxy as a brand itself, along with Mike Novogratz's long-accumulated personal reputation in the industry, is clearly one of the important variables influencing decision-making. For many cautious institutions that do not wish to exit completely, choosing who to act as the "agent" in the intersection of digital assets and traditional finance is often more critical than the specific strategic details. Galaxy has participated in multiple rounds of industry ups and downs in past cycles, accumulating a relatively complete business line and research team, which together form the basis for institutions to assess whether it can "survive in a high-volatility field." Since public information has not disclosed detailed performance data, we cannot and should not make any quantitative judgments about specific return rates or historical performance, but from the commitments already made, it is evident that the market at least recognizes Galaxy's qualification for another opportunity to "experiment within a hybrid structure."
Manager's Perspective and Execution on the Line of Life and Death
It is currently confirmed that this hybrid hedge fund will be managed by Joe Armao. Aside from this, public information has not thoroughly disclosed his past career history and historical investment performance, so the narrative cannot and should not extend to personal style or past achievements. What we can do is to deduce the life-and-death line of execution from the choices a fund manager might face within this 30% crypto tokens + 70% financial services stocks framework.
Imagine a typical trading day: against the backdrop of macro data and regulatory meetings causing dual disturbances, Bitcoin and leading tokens experience double-digit volatility during the day, while financial services stocks slowly decline under the pressure of interest rate expectations and regulatory rumors. As the fund manager, Joe must make choices along several interrelated curves: should he reduce the crypto token position to lock in short-term risks but sacrifice potential rebounds, or maintain on-chain exposure using hedging tools and options structures while increasing bets on "potential winners" among financial stocks? Within the established 30%/70% framework, dynamic position management is not simply a matter of minor adjustments in proportions, but rather a continuous decision-making process revolving around "how the correlation between the two sub-portfolios changes under different scenarios."
In extreme market conditions, this decision line becomes sharper. Suppose a new regulatory rule suddenly comes into effect, and the market interprets it as a significant negative for the overall digital asset ecosystem; crypto token prices plummet, and the prices of trading platforms, custodial service providers, and some bank stocks that are highly tied to it also come under pressure. In this scenario, both main revenue curves of the fund decline simultaneously, and the pressure to control drawdowns will erupt within a few trading days. At this point, the fund manager's tasks include not only stopping losses and reducing positions but also determining when and how to readjust the weights between assets: should he quickly and significantly reduce on-chain exposure and seek refuge in a broader financial sector, or stick to the original "winners and losers" narrative and increase positions in undervalued stocks, waiting for valuation recovery after the regulatory dust settles? All of this will directly determine the depth of the fund's drawdown in a single extreme event and whether it can still catch up or even exceed the benchmark during the next market rebound.
On a smoother timeline, the manager also needs to constantly switch between "earning beta" and "earning alpha." The positions in the crypto token portion can serve as leverage to capture the overall rise in the next cycle, or they can be used through relative value strategies and structured tools to smooth out short-term fluctuations in net value; the financial services stock portion requires micro-discrimination among different sub-sectors, constructing an internal structure of "long-term winner portfolio + short-term hedging targets" based on judgments of technological investment, compliance costs, capital structure, and business diversification levels. For Galaxy's fund, the real difficulty does not lie in initially setting the ratios of 30% and 70%, but in whether the fund manager has sufficient professional judgment and execution discipline to repeatedly navigate between these two worlds along the established risk boundaries without losing control when the market environment shifts multiple times.
Is the Hybrid Fund a Safe Haven or an Amplifier?
Returning to the starting point, this new fund with a target size of $100 million marks the first formal turn for Galaxy in its narrative from a "pure crypto gamble" to a composite bet of "financial services + on-chain assets." It no longer places all its chips on a single token price and on-chain narrative but attempts to reflect the long-term trend of digital assets penetrating the traditional financial system into a more familiar stock market return trajectory through a 70% allocation to financial services stocks. At the same time, the fund retains a 30% exposure to crypto tokens, allowing it to have enough flexibility to enjoy on-chain risk premiums when the next cycle arrives. In the context of intertwined regulatory uncertainty and market expectations, this structure serves both as a correction to the previous round of aggressive behavior and as a larger-scale bet: Galaxy is no longer just betting on on-chain but is wagering on the broader direction of "how the financial system accommodates and reshapes on-chain assets."
From a medium- to long-term risk-return characteristic perspective, such products are difficult to simply categorize as "bullish" or "bearish"; they resemble a conditional bet constructed in an uncertain world. As long as the following premises are roughly valid—major jurisdictions worldwide will not implement a comprehensive, permanent ban on crypto assets in the next two to three years; companies in the financial services sector that truly embrace technology and compliance innovation can gradually outperform laggards in profitability and valuation; and while the macro liquidity environment may fluctuate, it will not remain in a state of extreme tightening for long—then this "30% on-chain + 70% affected financial stocks" combination has the opportunity to achieve excess returns above traditional financial sector exposures under the premise of lowered overall risk levels. Conversely, if the regulatory path experiences severe reversals, or if the global financial system encounters systemic shocks in a short time, leading crypto assets and related financial service stocks to become outlets for emotional release, then this type of hybrid fund is likely to shift from a "safe haven" to a "volatility amplifier," exposing structural weaknesses during drawdowns.
Looking ahead to the next two to three years, this type of hybrid fund may face several distinctly different trajectories: if regulation gradually takes shape and the overall attitude trends toward "conditional openness," with crypto infrastructure moving toward compliance mainstream, and financial service winners begin to reap institutional dividends in stock prices, then Galaxy's attempt will become a template with demonstrative effects, attracting more traditional asset management institutions to launch product lines of "crypto beta + regulated assets" under similar frameworks; if the regulatory rhythm remains uncertain and market risk appetite for digital assets frequently flips under policy shocks, then these funds will seek their risk boundaries through rounds of "trial and error + adjustment," potentially being viewed as high-risk experimental products or being pushed back into pure crypto or pure traditional finance business lines; and in the most pessimistic scenario, if regulation and the macro environment tighten together, leading on-chain assets and deeply tied financial service stocks to face valuation re-evaluations, this hybrid structure may be seen as a cyclical product of a generation, becoming a case repeatedly dissected in risk management textbooks for future generations.
Regardless of the scenario, Galaxy's "hybrid bet of $100 million" initiated in the first quarter of 2026 marks the opening of a new path: the world of digital assets and the world of traditional finance are no longer just one-way penetrations but are beginning a difficult coexistence experiment within the same product. Whether it ultimately becomes a new safe haven or is proven to be merely an amplifier of risk will be answered by time and the shape of the next cycle.
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