A leveraged AI hedge fund that gained 439% through June lost roughly two-thirds of its value in July and sold most of a $16 billion stock portfolio to Citadel. The unwind shows why Bitcoin, which trades around the clock, can be the fastest asset a fund sells when a margin call hits — even with no crypto-specific trigger.
Situational Awareness, the AI-focused hedge fund led by former OpenAI researcher Leopold Aschenbrenner, gained 439% from the start of 2026 through June and grew to manage roughly $20 billion. In July, it lost about 67% of its value and sold most of a public-stock portfolio once estimated at $16 billion to Ken Griffin's Citadel, with reported holdings including Broadcom, Intel, and CoreWeave.
Leverage turns conviction into a deadline
Leverage can turn a manageable loss into a much larger hit to a fund's own capital. A lender that grows uneasy can demand cash, safer collateral, or forced sales — a margin call — long before an investment thesis has a chance to prove out.
Reuters reported that it was unclear whether Situational received a formal margin call before the deal, though its portfolio included positions financed with borrowed money and the fund faced pressure to raise capital or reduce exposure. The Financial Times separately reported that prime brokers were demanding more collateral from hedge funds concentrated in falling AI stocks.
Bitcoin's round-the-clock market makes it the fast sale
Bitcoin trades across nights, weekends, and holidays, giving cash-strapped funds a liquid asset to sell when private shares or bonds can't move before Wall Street reopens. Coinbase Institutional has argued that Bitcoin can be among the first assets cross-market funds unload during a liquidity squeeze because it combines 24-hour trading, high volatility, and deep markets.
There's no evidence Situational owned or sold Bitcoin in the Citadel deal — its reported portfolio centered on public equities and a stake in Anthropic. But a similar dynamic has hit the asset before: during a yen carry-trade scare, a shift in currency financing threatened to force multi-asset investors to cut risk and exposed Bitcoin to losses with no new crypto-specific catalyst, and a separate macro decline produced $2.56 billion in Bitcoin liquidations.
Pressure is building beyond one fund
The strain extends past Situational. Asia-focused fundamental long-short funds lost an average of 18.6% through July 28, their largest monthly decline in Goldman Sachs data. US investors had borrowed a record $1.5 trillion through margin accounts by June, pushing their net balance with brokers into a roughly $1 trillion deficit for the first time. The Bank for International Settlements warned in June that a reversal in AI optimism could produce wider financial consequences given how much of the AI buildout depends on debt.
Goldman Sachs has described the record technology-stock selling as a reset of crowded positions rather than a collapse in AI conviction, and strong cloud earnings later helped several of those shares recover. Still, the next large Bitcoin decline may begin without a hacked protocol, government ban, or failed crypto company — it may begin when an AI investor gets a call from a bank and sells the largest liquid asset still available.
Source: CryptoSlate
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