February 2025
Alpha Node Capital faced the aftermath of the US trade war and the Bybit exchange hack, leading to a retracement in managed funds this month. The Digital Fund recorded a 26.25% loss, while the market-neutral fund, Alpha Prime Trust, successfully mitigated risk, limiting its loss after a 0.02% gain. These results aligned with broader market retractions, particularly as Digital Fund’s portfolio saw double-digit declines. While Alpha Prime Trust had exposure to Bybit, we effectively implemented a recovery plan ahead of the hack announcement, minimising potential fallout. However, forced liquidations of open positions impacted performance, exacerbated by plunging funding rates as fear spread throughout the sector.
The current market conditions mirror pre-COVID-19 dynamics, yet we view this as part of a mid-cycle correction, similar to past market patterns. Following this phase, we expect the market to resume its four-year cycle, potentially extending through the end of 2025 and the first half of 2026. This outlook aligns with US President Donald Trump’s pro-crypto stance, which is gradually shaping a more favourable regulatory landscape.
Beyond price movements, cryptocurrency represents a technology poised to disrupt traditional finance, global economies, and everyday life. We remain steadfast in the long term thesis and are encouraged by proposed regulatory changes abroad.
Alpha Prime Trust
Alpha Prime Trust successfully mitigated exchange risk by swiftly implementing our recovery plan in response to the situation. The market-neutral fund recorded a slight increase with a 0.02% performance, driven by the rapid unwinding of positions to exit the Bybit exchange as a precautionary measure. While this decision tempered some February gains, it ensured minimal exposure to potential contagion. Meanwhile, our diversified approach contributed positively, as our DeFi strategy delivered a 0.79% return, supporting the fund’s overall performance.
Given the heightened market volatility and security concerns, we opted to pause capital deployment into the market-neutral strategy until conditions stabilise, with plans to redeploy funds by mid-March. While we remain confident in the broader bull market, the ongoing correction has caused funding rates to move against our strategy, reinforcing the need for a cautious approach. We continue to actively monitor opportunities to capitalise on market upswings while prioritising risk management.
Additionally, our DeFi strategy has demonstrated resilience, and we anticipate that it will continue to outperform during market downturns, providing stability to the fund’s overall performance.
Digital Fund
The Digital Fund closed the month with a 26.25% loss, primarily due to negative sentiment generated by Trumps trade war, which left most holdings vulnerable to the sector-wide decline. The largest detractors were Chainlink (-43.68%) and Aave (-43.61%), both of which had delivered strong performances over the past five months but experienced their first significant pullback. In contrast, Maker outperformed the sector, gaining 33.06%, driven by active governance measures that helped derisk the protocol following multiple liquidations. The protocol’s risk management efforts included adjustment the USDS stablecoin savings rate to 8.75% and the DAI savings rate to 7.25%, reinforcing borrower stability and reducing systemic risk amid market volatility.
Bitcoin fell 20.50% to US$83,878.34, impacted by heightened uncertainty from the ongoing trade war, which weighed on risk assets. Additionally, the Bybit hack exacerbated market concerns, triggering the exchange’s largest-ever withdrawal event as investors feared an FTX-like contagion. However, Bybit swiftly
addressed the vulnerability, prompting a gradual recovery. Ethereum was also hit hard, declining 35.27% to US$2,221.20.
Market sentiment remained in fear territory, suggesting that the sell-off was emotion-driven rather than fundamentally driven. While this is a key factor, the escalating trade war could prolong downside pressure. Nonetheless, current price levels present an opportunity for accumulation, with the potential for a market rebound as regulatory clarity improves and sentiment stabilises in favour of the sector.