NEW YORK, Dec 17 (Reuters) — The recent downturn in cryptocurrency markets has prompted investors to shift toward more actively managed and risk-hedged strategies, according to market participants and on-chain data. Bitcoin, which peaked at a record $126,223 on October 6, has tumbled by as much as 36% and remains roughly 30% below that high, underscoring heightened volatility.
Traditional bitcoin treasury companies such as Strategy Inc (MSTR.O) and Metaplanet (3350.T) saw their share prices plunge amid collapsing premiums on bitcoin holdings. Strategy’s stock is down approximately 63% from its mid-July level, prompting firms to reassess their capital allocation models. Leverage and high valuations have been key detractors, with leveraged vehicles and protocols suffering worst during the sell-off.
In response, many investors are turning to instruments that offer active management or built-in hedges. VanEck’s Onchain Economy ETF, launched in May, has returned 32% by underweighting over-leveraged names, while EMJ Crypto Technologies (EMJX) has introduced an actively hedged digital asset treasury fund that sells options and diversifies across bitcoin, ether, and select altcoins. This trend reflects a broader maturation of the crypto asset class toward institutional-style portfolio construction.
Mining companies, once a hotbed of investor interest due to cheap energy access, have been pivoting toward AI data centre operations to leverage rising demand for compute and to address profitability concerns. Firms such as IREN (IREN.O), CleanSpark (CLSK.O), Riot (RIOT.O), and MARA Holdings (MARA.O) are repurposing capacity to host AI workloads, potentially offsetting mining revenue declines.
Institutional confidence in bitcoin remains intact. Harvard University’s endowment has increased its position in BlackRock’s iShares Bitcoin Trust (BLK.N) to become its largest publicly disclosed holding, while sovereign wealth funds in Luxembourg, Abu Dhabi, and the Czech Republic continue to build stakes. Bitcoin’s growing role as a hedging and portfolio diversification tool is cited by asset managers as a primary driver for renewed capital inflows.
“Investment vehicles for bitcoin have exploded across both retail and institutional markets, fundamentally expanding access,” said John D’Agostino, head of strategy at Coinbase Institutional. “However, the nuances matter in terms of leverage expression and hedging, and active management is key in this immature asset class.”
Analysts note that the convergence of crypto and AI infrastructure represents a compelling cross-sector opportunity. Morgan Stanley estimates that U.S. data centres face a shortfall of 47 gigawatts by 2028, and repurposed crypto mining facilities could alleviate up to 15 gigawatts. Such dual-exposure models appeal to investors seeking growth stories across two leading technology trends.
Reporting by Karen Brettell; Editing by Alden Bentley and Matthew Lewis.
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