Zaheer Ebtikar is shutting his two-year-old crypto fund and joining stablecoin startup Plasma as chief strategy officer, arguing that ETFs have made the hedge fund structure obsolete in digital assets.
Zaheer Ebtikar made roughly 100 per cent for his investors in 2024 and 20 per cent in 2025, and he is closing his fund anyway.
Split Capital, the crypto hedge fund Ebtikar launched in January 2024, has returned all investor capital and is winding down operations. Ebtikar is joining Plasma, a stablecoin infrastructure startup, as chief strategy officer — a move that says less about one fund's performance and more about what has happened to the business model underneath the entire crypto hedge fund industry.
The problem, as Ebtikar sees it, is structural. The arrival of spot bitcoin and ether ETFs in the United States has given institutional allocators a cheap, regulated, liquid way to get crypto exposure without paying a hedge fund's management and performance fees. When BlackRock's IBIT charges 25 basis points and offers instant liquidity through a brokerage account, the value proposition of a two-and-twenty fund that locks capital for a year and trades the same underlying asset becomes difficult to articulate — even when that fund is generating triple-digit returns.
"The entire hedge fund industry in crypto is kind of down and out," Ebtikar told Fortune. That assessment, from someone who was winning at the game he's choosing to leave, carries more weight than the usual post-mortem from a fund that blew up. Split Capital didn't fail; it succeeded on terms that its founder concluded were no longer sustainable.
The timing aligns with broader data. JPMorgan estimated that crypto capital inflows crashed to $11 billion in Q1 2026, with retail and institutional demand both pulling back. Spot bitcoin ETFs saw net outflows for two consecutive months before stabilising in March. The institutional money is still moving into digital assets, but it's flowing through passive wrappers — ETFs, tokenised funds, structured products — rather than through actively managed hedge funds that charge premium fees for alpha that is increasingly hard to differentiate from beta.
Ebtikar's pivot to Plasma tells its own story about where the smart money thinks crypto's next margin pool sits. Plasma raised $24 million in February from Framework Ventures, Bitfinex, Peter Thiel, and Tether CEO Paolo Ardoino. The company is building infrastructure for stablecoin settlement and global financial access — a business that depends on transaction volume rather than asset appreciation, and one that benefits from the same macro conditions (high interest rates, geopolitical instability, demand for dollar-denominated savings in emerging markets) that have made directional crypto trading less predictable.
The crypto hedge fund model was always borrowed from traditional finance, and it was borrowed at a time when the asset class had no passive alternatives. Before January 2024, the only way an institutional investor could get bitcoin exposure through a regulated US vehicle was Grayscale's GBTC — a closed-end trust that often traded at a significant premium or discount to net asset value. Hedge funds that could offer better execution, tighter spreads, and alpha through DeFi yield or basis trades had a genuine competitive moat. The SEC's approval of spot bitcoin ETFs collapsed that moat in a single day.
What remains for crypto hedge funds is the kind of idiosyncratic alpha that ETFs cannot replicate: MEV extraction, protocol governance arbitrage, early-stage token investments, and cross-chain yield strategies. Some funds will survive by specialising in those niches. But the broad market-making and directional trading that defined the first generation of crypto hedge funds — the kind of business Split Capital ran — now competes with products that are cheaper, more liquid, and backed by firms with trillions in distribution.
Ebtikar returned capital to his investors in late 2025 rather than letting the fund bleed out slowly. That decision — shutting down while ahead rather than grinding through a deteriorating business model — is itself a contrarian trade. Most hedge fund managers, in crypto and elsewhere, keep running because the management fee pays the bills even when alpha disappears. Ebtikar chose to leave the fee stream behind for equity in a stablecoin startup, which is either a conviction bet on the future of payments infrastructure or a recognition that the fund management game in crypto has reached its endgame.
The distinction between those two explanations probably doesn't matter. Both point in the same direction: the hedge fund era in crypto is ending not because the funds lost money, but because the market found cheaper ways to do what they did.
