Cryptocurrency Fund Management Firms Shift Focus to Edge Tokens, Exacerbating Market Volatility Concerns

Recently, the cryptocurrency market has once again entered a period of volatility. As the prices of mainstream cryptocurrencies like Bitcoin fluctuate, some fund management firms (DATs) have begun shifting their investment focus to edge tokens—crypto assets with small market capitalization, low liquidity, and high risk. This strategic shift has not only raised questions about the safety of funds but has also exacerbated concerns about overall cryptocurrency market volatility. Experts warn that such behavior could be the trigger for a new crisis.

Traditional cryptocurrency fund management firms typically focus on holding mainstream cryptocurrencies like Bitcoin and Ethereum as their core strategy due to their relatively stable market position and liquidity. However, with increasing regulatory pressure and narrowing profit margins for mainstream cryptocurrencies, some institutions are seeking high-risk, high-return edge tokens. Standard Chartered analysts point out that these firms hold large amounts of Bitcoin and Ethereum, and their investment decisions have a significant impact on the market. When they inject funds into edge tokens, it could trigger a liquidity squeeze, leading to sharp price fluctuations.

For example, data from Singapore-based 10x Research shows that retail investors have lost approximately $17 billion following investment strategies from companies like MicroStrategy. While companies like ETHZilla and Forward Industries have attempted to stabilize their stock prices through buyback programs, market concerns remain about their long-term sustainability. Kyle Samani, Chairman of Forward Industries, admitted, "Success depends on wise decisions by the management team, but the high risk of edge tokens makes this goal challenging." The influx of funds into edge tokens by asset management firms has directly fueled price bubbles in related assets. AI tokens have recently surged against the market trend, with Fetch.ai (FET) seeing a single-day increase of over 20%, but these tokens lack fundamental support and are highly susceptible to collapse due to changes in market sentiment. Historical examples have warned of the risks: in 2025, LUNA plummeted by 99%, wiping out hundreds of billions of dollars in wealth and triggering a chain reaction. Currently, if edge tokens repeat this pattern, it could drag down the entire crypto ecosystem.

More seriously, the liquidity risks of edge tokens could impact the stablecoin system. If Tether Limited, the world's largest stablecoin issuer, is impacted by a liquidity crisis at affiliated institutions (such as Celsius), it will shake market confidence. Hilary Allen, a finance expert at an American university, warned, "Tether is the lifeblood of crypto; its collapse could cause the entire wall to fall." This systemic risk has drawn significant attention from regulators, with the Federal Reserve emphasizing the "structural fragility" of stablecoins in its latest report and calling for stronger regulations.

Faced with market chaos, global regulation is tightening rapidly. The US GENIUS Act, the EU's MiCA Regulation, and Singapore's stablecoin framework all aim to regulate fund management companies and the operation of crypto assets. However, experts believe that regulation alone is insufficient to curb risk; institutions themselves need to strengthen their risk control capabilities and avoid blindly pursuing short-term gains. Multicoin Capital co-founder Samani urged, "Investors should bet on the long-term strategy of the management team, not on gambling-style speculation."

In the future, the cryptocurrency market may enter a "de-crypto" phase. Increased regulatory uniformity will drive the integration of compliant stablecoins with mainstream finance, while peripheral tokens may gradually become marginalized. A Chainalysis report shows that global stablecoin trading volume exceeded $10 trillion in 2024, with emerging markets accounting for over 60%, suggesting that compliant assets will become mainstream. Against this backdrop, asset management companies must balance innovation and risk in their transformation; otherwise, they risk becoming victims of the next crisis.

The cryptocurrency market has never been volatile, but aggressive strategies toward fringe tokens are pushing the industry to the brink of danger. Only under the dual constraints of regulation and self-discipline can the mistakes of the "Lehman moment" be avoided.