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AI hedge fund unwind underscores risk of crypto-first liquidation in stress

The $20 billion fund gained 439% through June, then fell roughly two-thirds in July after selling most of a roughly $16 billion public-stock portfolio.

Reported · Written up by our desk · Market Structure

An AI hedge fund that grew to manage about $20 billion is now being cited as an example of how rapid deleveraging can force asset sales during market stress, including potential knock-on implications for Bitcoin and other liquid holdings.

According to CryptoSlate, the fund Situational Awareness gained 439% from the start of 2026 through June, then lost roughly two-thirds of its value in July. As leverage pressures built, it sold most of a public-equity portfolio that was once estimated at about $16 billion, with reported holdings linked to AI infrastructure and buildouts.

CryptoSlate said Reuters reported it was unclear whether the fund received a formal margin call before the Citadel-linked deal, but noted the portfolio included positions financed with borrowed money. The Financial Times separately reported that prime brokers were demanding more collateral from hedge funds concentrated in falling AI stocks, highlighting how lenders can tighten terms and push sales even if the original investment thesis has not fully broken.

The collapse was framed as a reminder that borrowing can amplify both gains and declines, and that lenders can demand more cash or safer collateral through margin calls. In that setup, the first asset sold may be driven by what is still trading and liquid enough to raise cash quickly, rather than by the asset most responsible for the losses.

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