Crypto hedge funds are starting to redirect their focus beyond digital tokens, using the same always-on trading infrastructure to target traditional assets such as commodities, equities, and indices as returns in core crypto strategies compress. Platforms like Hyperliquid, Ostium, and Lighter — originally designed for continuous crypto trading — are now seeing increasing activity tied to instruments like crude oil, copper, and the Nasdaq 100 QQQ. This shift appears to be driven by narrowing opportunities in crypto markets, where strategies such as basis trades have seen returns decline from high double digits to around 5% to 6%, while stablecoin lending yields have dropped from as high as 30% to low single digits. At the same time, geopolitical tensions have added momentum, with weekend trading in oil contracts on Hyperliquid providing an early indication of market positioning before traditional exchanges reopen.
Fund managers are adapting by applying familiar quantitative strategies to these newer markets, focusing on pricing inefficiencies rather than outright directional bets. Alpha EV, founded by Taylor Godwin, has recently deployed relative-value trades between commodities, including a position pairing a short bet on silver with a long position in copper. In that case, elevated funding costs on crowded silver positions — where annualized fees moved above 250% — contrasted with copper trading near $5.80 per pound, creating an opportunity that generated annualized returns of 20% to 30% over roughly a week. Across the industry, this approach appears to be gaining traction. A survey of 51 fund managers overseeing more than $3 billion found that about a quarter expect most new activity on Hyperliquid to come from traditional assets, while nearly half anticipate a roughly even split between crypto and non-crypto trades. At M-Squared, similar real-world asset arbitrage strategies are generating approximately 1% to 3% monthly returns, compared with around 0.5% from more traditional crypto-focused approaches.
The broader ecosystem is expanding alongside this shift, with tokenized real-world assets reaching about $26.5 billion in market value, up roughly 360% since 2025. Firms such as Fasanara Digital are exploring arbitrage opportunities between tokenized gold products and perpetual contracts on exchanges like Binance and OKX, while others are developing dedicated strategies focused on commodity spreads. Still, several structural constraints remain, including fragmented liquidity, limited regulatory oversight, and challenges in executing cross-market arbitrage between blockchain venues and traditional exchanges. Price dislocations and risks tied to oracle-based pricing could introduce volatility, particularly in leveraged positions. Even so, these inefficiencies may persist in the near term, and for many managers, they represent a potentially attractive extension of the same trading playbook that once defined crypto markets.