Analysis: Poor Performance of Cryptocurrency Liquidity Funds, Funds Shift to High-Quality Tokens

According to a report from Jinse, cryptocurrency liquidity funds have performed poorly so far in 2025, with losses reaching up to 70%, as revealed by several investors (such data is typically shared only among internal and limited partners). After a challenging first quarter in 2025, liquidity fund investors are now concentrating on a small number of high-conviction investment projects. In this cycle, fundamentals rather than market trends are driving investment decisions. Most liquidity funds performed strongly in the beginning of the year, but suffered severely as financial markets, including cryptocurrencies, were hit by wider turbulence, from tariff policies to macroeconomic uncertainties. "The first few weeks of the year were very strong, but starting mid-January, the entire altcoin market began to collapse."

Rob Hadick, a General Partner at Dragonfly, stated, "Bitcoin has fallen about 10% this year, Solana (SOL) is down about 30%, Ethereum (ETH) is down about 50%, and the situation is worse for many altcoins, making it difficult for funds to find a safe haven." Jack Platts, founder of Hypersphere Ventures, noted that most liquidity funds invested heavily in Solana in 2024, which has dragged down their returns for the year so far. Some losses were anticipated. With Bitcoin becoming more accessible to institutional investors through ETFs, actively managed fund managers are often explicitly instructed not to hold Bitcoin. Cosmo Jiang, General Partner at Pantera Capital, mentioned that investors are seeking exposure to assets beyond Bitcoin and even Ethereum through liquidity funds.