Function CEO Thomas Chen warns that Bitcoin poses a looming danger. The former head of sales at BitGo, Chen now spearheads the development of institutional-grade architecture for Bitcoin yield. Backed by partners like Galaxy Digital, Mantle, and Antalpha, Function has reached over $1.5 billion in TVL
Chen believes that even though Bitcoin plays the roles of a risk asset and a hedge, the hedging characteristic is more dominant. Meanwhile, current macroeconomic conditions are waning confidence in long-term sovereign bonds.
Heading into the last two weeks of October, there’s a looming danger. Hedge funds and family offices tend to dump the “altcoin” bucket first under low market confidence, and that’s game over. He says all the extra speculation in altcoins is a Rube Goldberg machine back to Bitcoin.
Chen’s full commentary is below.
“In the current macro environment, we’re seeing gold prices rally near the $4,400 ceiling, renewed tariff fears, sharp selloffs, and even plunging regional bank stocks. But with crypto, especially Bitcoin’s hedging characteristic, is becoming more dominant, even if it’s playing the roles of a risk asset and a hedge.
“We’re seeing several factors line up together. Persistent inflation concerns and fears of fiscal dominance are shrinking confidence in the otherwise traditional safe havens, in particular, long-term sovereign bonds.
“In the longer term, though, the thesis for Bitcoin’s non-sovereign and scarcity narrative dominance remains intact. Indeed, Bitcoin is showing fewer signs of being a pure risk tech stock and establishing itself as a hard-asset hedge against fiscal uncertainty.
“In fact, there are no mass liquidations of equity or fixed income portfolios to fund these purchases. It’s institutional capital that was previously on the sidelines that is now getting deployed from cash reserves or dedicated new mandates for alternative assets.
“The massive scale of ETF inflows shows institutions are excited about crypto right now, alongside the current corporate treasury buys like the $1 billion acquisition of GTreasury by Ripple and the DAT boom. Overall, these suggest this is an expansion of global asset allocation, and indeed, not a rotation.”
“Oct. 9’s sudden liquidations strongly put forth a foundational divide between retail speculation and institutional investment management. Retail gets liquidation, while institutions manage risk.
“The problem last weekend was the inability to execute a core risk-management function efficiently. Indeed, it was a stress test for the entire system.
“But there’s another danger heading into the last two weeks of October. If we’re again in a highly levered situation with altcoins, and Bitcoin drops 10%, alts can easily go down 40–50% if the interest remains weak, and it’s game over.
“Zooming out on flows, a few hedge funds and family offices that hold crypto usually keep a Bitcoin and Ethereum basket. However, it’s the altcoin bucket that gets dumped first under low market confidence conditions.
“We’ve seen this happen many times. Given the current macroeconomic concerns over tariffs, faith in alts vanishes quickly, and flows move back into BTC in a bear market. Sometimes it feels like all the extra speculation in alts is a rube goldberg machine back to Bitcoin.
“However, it’s worth bringing up that markets often overreact and then correct themselves.”
