Review and Preparation of the Head Liquidity Fund: Pure Secondary Market Approach, Better for Retail Investors to Follow

null

This article is from: Fisher8 Capital

Compiled by Odaily Planet Daily (@OdailyChina); Translator|Azuma(@azuma_eth)

Editor’s note: 2025 is a thing of the past. At the beginning of the new year, many VCs are rushing to release reviews for 2025 and forecasts for 2026, but due to their own business model orientation, VCs tend to focus more on the primary market perspective, which is not very guiding for retail investors focusing on the secondary market. However, this review and preparation content of Fisher8 Capital, the leading liquidity fund, is different, not only a complete record of the institution’s success and failure in secondary operations in 2025, but also some more secondary thoughts on the market trend in 2026.

The following is the original content of Fisher8 Capital, compiled by Odaily Planet Daily.

Abstract

2025 will be an exceptionally difficult year for most liquid funds, characterized by extremely aggressive capital rotation and the overall underperformance of crypto assets. Although Fisher8 Capital has achieved some results in mainstream and on-chain assets, due to our high belief in several long-term themes (such as AI, DePIN, etc.), we have chosen to continue to hold relevant positions in the context of poor performance in some emerging tracks.

In the end, Fisher8 Capital ended with an annual return of 16.7%. We are confident that the discipline and insight we have gained during this highly volatile year will help us continue to outperform the market in the future. But from a risk-adjusted perspective, we might as well have put our money into childcare (note: this is a mockery of the Minnesota childcare scandal).

If you’re interested in working with us or are working on something interesting and innovative, feel free to contact us on X. We hope you enjoy our Year in Review and wish you all the best in the new year.

Transaction history

Our best trading actions for 2025 are as follows.

These are the worst trading operations.

2025 market review

Trump’s clear association with the crypto market

Ahead of the 2024 presidential election, it is widely expected that if Trump wins, it will be a major inflection point in the regulatory environment and valuation scale of cryptocurrencies. Expectations include:

end the supervision method of “law enforcement instead of supervision”;

clear support for stablecoins;

Explore the establishment of a “strategic Bitcoin reserve”;

and the launch of Trump-related projects such as World Liberty Financial (WLFI) in September 2024;

Together, these factors make crypto assets one of the most beta-coefficient expressions in the broader “Trump Trade” and priced in huge policy optimism ahead of the election results.

However, this optimism began to retreat, and the “Trump trade” as a whole reversed. This phenomenon is not only seen in crypto assets but also in stocks highly correlated with Trump, such as DJT, whose stock price peaked before the election and subsequently retreated significantly. Although the post-election environment confirms a more friendly policy statement for the crypto industry, the market is facing inertia in legal and regulatory advancement, as well as a series of fragmented and gradual policy achievements, which are difficult to offset the impact of overall de-risking on “Trump concept assets”.

Additionally, Trump himself has developed direct economic exposure to the cryptocurrency industry through his association with WLFI and the emergence of TRUMP. This has heightened market concerns that crypto assets have been financialized to some extent around Trump’s personal popularity, introducing a “perceived risk” that could directly translate into a weakening in the price of the underlying asset if its political capital declines.

Odaily Note: Forbes reported that the presidency increased Trump’s net worth by $3 billion in one year.

While these concerns are not unfounded, they can be alleviated by implementing long-term policies or reducing reliance on charisma-driven demands. Most notably, the Executive Order on Universal Alternative Asset Investment, signed in August 2025, expands 401(k) Retirement plan trustees include digital assets in the portfolio’s licensing scope. While the order does not mandate allocation, it essentially lowers the legal and reputational barriers to institutional participation, reshaping cryptocurrencies from a speculative marginal asset to one that can at least be allowed in long-term capital pools.

The real significance of this change is not whether there will be an immediate large inflow of funds in the short term, but the change in the market demand structure. With the inclusion of long-term capital related to pensions, the crypto market is beginning to transition from a purely supply-driven halving cycle to a policy-regulated demand cycle, characterized by longer maturities and more sticky capital. Even marginal adoption in the context of scale has the potential to raise price equilibrium levels and reduce downside volatility compared to the 50–80% deep drawdown in previous cycles.

The narrowing of the scope of “risk appetite” transactions

The connotation of “risk appetite” trading is becoming more complex. Unlike previous cycles, when risk appetite picks up, speculative capital will pour into meme and long-tail assets, and the income differentiation between beta assets in 2025 will be extremely significant. This is particularly evident in the fact that memes were relatively lackluster when BTC hit new all-time highs in early October.

Instead, investors began to concentrate their funds on a smaller subset of crypto assets, such as “equity-like assets” (DATs, CEXs, and funds) with crypto exposure, prediction markets, or tokens with clear value capture mechanisms. This differentiation reflects the maturation of market structures: capital is becoming more selective and rapidly rotating, and capital flows are more short-term and narrative-driven. Investors chase local momentum, reap gains quickly, and keep rolling liquidity to the next narrative. In 2025, the narrative cycle will be compressed, and the duration of transactions will be shorter than in previous cycles.

In this environment, the idea of holding altcoins for large returns for a long time has largely become a phantom. With the exception of major tokens like BTC, ETH, and SOL, which benefit from institutional capital precipitation, others tend to only appreciate when compelling narratives are active. Once that narrative declines, liquidity dries up and prices return. The narrowed range of risk-on trades has not extended the life of altcoins, but has accelerated the pace of capital testing, draining and abandoning new narratives. This further strengthens the judgment that long-term crypto investments in the true sense of the word are still concentrated in a very small number of assets.

Expansion of Digital Asset Treasury (DAT).

The rise of Digital Asset Treasuries (DATs) has introduced a new capital formation mechanism designed to replicate MicroStrategy’s path to success. DAT allows public companies to raise funds and allocate directly to crypto assets, creating an embedded crypto exposure agent and bypassing the regulatory vacuum before altcoin ETFs are approved.

As this structure spreads rapidly, the market quickly bubbles up – a large number of new carriers rush to package themselves as “DAT” for an altcoin, even if there is no real and ongoing demand for the asset.

The capital structure employed by many altcoin DATs, which we classify as predatory. Specifically, such structures often carry out financial engineering operations by exchanging tokens in kind for shares, with the aim of creating exit liquidity while introducing a group of new participants. It is supplemented by a private placement round with extremely low cost and extremely favorable lock-up conditions.

These mechanisms allow insiders to ship large quantities of goods under extremely limited buying pressure, resulting in retail investors being quickly extracted value in both stock and token markets. This size mismatch is particularly evident in some aggressive DAT schemes where some companies are trying to raise much more money than their market capitalization on the open market itself.

The main line of investment in 2026

Conclusion 1: Asymmetric benefits will appear at the application layer

The “era of currency premium” enjoyed by the new generation of altcoin Layer1 is coming to an end. Historically, this premium has been largely underpinned by the “Fat Protocol Thesis” and “Moneyness” narratives – the idea that infrastructure captures value disproportionately and that its tokens will eventually evolve into global stores of value.

However, the market has completed the integration of this monetary function around mainstream assets such as BTC, ETH, SOL, and stablecoins, and the “monetary” imagination space of the new Layer1 has been completely stripped away.

Odaily Note: The highest all-time fully diluted valuation (ATH FDV) statistics for Layer1 tokens at TGEs in each year.

With the disappearance of the “monetary” moat, the social consensus that once gave the new public chain a multi-billion dollar valuation is collapsing. Since 2020, altcoin Layer1 has shown a clear structural downward trend, strongly indicating that the currency premium is continuing to fade.

In addition, the valuation “bottom” that still exists is largely artificial: in recent years, many Layer1s have launched through fixed-price ICOs or direct listings on CEXs, with the team artificially setting the initial price. If these assets are forced to accept real price discovery at launch, we believe that their valuations will most likely not come close to the historical averages of past cycles.

This valuation collapse trend is still being further amplified by the inertia advantage of existing public chains. The mature ecosystem already has a large number of “sticky applications” that firmly lock users in, forming a very high barrier to entry for new altcoin Layer1s.

From a data point of view, since 2022, about 70–80% of DEX trading volume and TVL have always been concentrated on three chains. Among them, Ethereum always occupies a place, and the other two positions rotate in different cycles. Breaking this oligopoly is almost a headwind battle for new entrants, and historical experience shows that most projects end up not getting long-term seats.

Odaily Note: Comparison of application revenue / chain layer revenue of ETH, SOL and BNB.

We believe that the revaluation of application tokens has begun, and its core driving force comes from the significant divergence in value capture capabilities between Layer1 tokens and underlying applications. As shown in the chart above, there has been a significant decoupling between application layer revenue and infrastructure revenue over the past two years: application revenue in the ETH and SOL ecosystems has increased by up to 200–300 times.

Despite this, the market capitalization of the app is still only a fraction of the market capitalization of the L1 it is in. As the market matures, we expect this mismatch to be corrected by the rotation of capital from overvalued infrastructure assets to applications with real revenue.

Conclusion 2: The midterm elections will create a highly volatile environment

The Trump administration’s current policy focus is clearly on securing victory in the 2026 midterm elections, with overall policy design biased towards supporting short-term economic momentum. The One Big Beautiful Bill Act (OBBBA) increases the probability of an inflationary reflation environment by marginally increasing demand through deficit financing. For digital assets, this fiscal expansion is positive for hard assets such as Bitcoin, making it the ultimate “scarcity hedge” again.

At the same time, this fiscal expansion is likely to encounter supply-side constraints in some areas, such as grid capacity and manufacturing capacity. These bottlenecks will create inflationary pressures at the input cost and wage levels of related industries, even if they are still suppressed by structural deflationary forces such as tariff normalization and AI productivity gains at the overall level.

The resulting macro environment is characterized by high nominal growth, but volatility rises simultaneously, and the market will periodically reprice inflation risks. This tension will structurally push volatility higher. The market may oscillate between “reflationary optimism” and “inflation resurgence” fears, especially as economic data gradually reveals capacity constraints rather than lack of demand.

Adding to this macro background is the historical pattern of midterm election cycles that have historically raised political risk premiums – investors often demand higher risk compensation in response to policy uncertainty before elections. Underpinning this pattern is a clear political motivation to tolerate and even widen the fiscal deficit during midterm election cycles. At the same time, if the Fed leadership tends to be dovish, it will also provide a more accommodative liquidity environment for risk assets.

Although this combination implies higher volatility in the short term, in the long term, the impact of OBBBA combined with the continued advancement of crypto-specific legislation still leads us to believe that 2026 is a constructive year for digital assets, only the path will be more bumpy.

Conclusion 3: Selective enhancement shapes the K-shaped differentiated token economy

The crypto market is bidding farewell to the stage of undifferentiated capital allocation and entering a period of brutal structural differentiation - a K-shaped economy dominated by selectivity. The era of rising tides and rising boats is over. The market has shifted from blindly chasing speculative narratives to a greater focus on the alignment of real interests at the protocol level with token holders.

At the heart of this shift is the market’s complete rejection of the “Equity-Token Split” model. The structure was originally designed in response to the regulatory pressures of the Gensler era, but the ambiguity of its enforceability has always been a huge pitfall. In this model: insiders (team vs. VC) have real value (IP, revenue, equity); Retail investors only get “governance tokens” without any enforceable rights.

This mismatch creates a two-tiered system – insiders own fundamentals and token holders own sentiment. Since it is difficult for the market to distinguish the real situation of different agreements, it finally chooses to discount the entire sector indiscriminately. Therefore, the current downcycle is essentially a repricing of trust. Future winners will depend on their ability to demonstrate a clear, actionable, and durable path to value capture.

Under this new paradigm, the upper end of the “K” will be made up of teams that replace “trust me” with “verifiable”. Credibility here no longer comes from the reputation or social capital of the founders, but from their willingness to actively impose structural constraints on themselves. These teams demonstrate their ability to complete value alignment by: making the value engine auditable; Make the flow of income enforceable; Actively strip itself of its ability to transfer value off-chain. This transparency will be the basis for buying tokens – in downcycles, sticky capital is willing to support their valuations because they trust mechanisms, not just people.

Blockworks’ Token Transparency dashboard is a great tool that categorizes protocols based on the level of disclosure required by the framework.

In contrast, the assets on the downside of the “K-shape” are facing a liquidity crisis caused by the collapse of the team’s credibility. The market now sees ambiguity as an acknowledgment of inconsistent interests. If the team refuses to clarify the relationship between protocol revenue and tokens, investors tend to assume that the relationship does not exist at all. In the absence of a high-cost signal of “executable value capture”, such tokens cannot be fundamentally valued, and when the narrative ebbs, there is no natural buyer to support it. Teams that require investors to rely on “good intentions” or selectively blur future promises are being systematically eliminated and destined to continue to lose blood in the race with premium protocols.

Other preliminary judgments

The collectibles market will expand further – and into sports memorabilia, especially those that are associated with major historical moments and have great value. For example: Shohei Ohtani’s 50/50 home run ball hit an all-time high at auction house.

Prediction markets are expected to be the new Meta. Following Hyperliquid’s TGE as an exemplary effect on the entire track, Polymarket’s TGE with Kalshi is expected to ignite the prediction market narrative.

Doubts about the dual structure of “equity-token” will continue to intensify. More and more investors will demand clear, auditable explanations of value allocation, clarifying how economic value is divided between the stake structure and token holders; Otherwise, it should be a pure token structure.

The potential risk of DAT being removed from the MSCI index (final decision: January 15, 2026) is under scrutiny by the market. Once this uncertainty is eliminated, it may trigger a new round of rebound at the beginning of the year.

“Ownership Coins” will become the new normal, structurally reducing the risk of “chronic rug” for founders.

Privacy-enabled DApps will be more popular with both retail and institutional investors. Agreements that balance user experience with programmability, while also achieving a high level of compliance, will win the privacy track.

Tokenized stocks will experience an accelerated version of the “boom-collapse” cycle, as their initial adoption is likely to remain limited.