A Bitcoin and altcoin fund seems to be in trouble lately. Multicoin Capital has lost close to 92 percent in 2022. Here are the details…
Altcoin fund suffered serious damage
Multicoin Capital’s hedge fund lost 91.4% in 2022, according to a copy of the company’s annual investor letter. The letter attributed last year’s decline to a turbulent year for cryptocurrencies, as well as the direct and indirect impact of the collapse of crypto exchange FTX. “While the fund successfully recovered from the devastating explosions of LUNA and Three Arrows Capital earlier in the year, we did not avoid the explosive revelations about FTX and the subsequent market contagion,” the letter said. “After the extraordinary year in 2021, our performance in 2022 was the worst since the start,” they added.
In a separate letter to investors last November, Multicoin detailed the hedge fund’s finances, revealing that 10 percent of the fund’s assets are tied to FTX, while also having significant exposure to FTT, SOL and SRM, all tokens plummeting. . Multicoin Capital, headed by managing partner Kyle Samani, launched its hedge fund strategy that invests in liquid tokens in October 2017. The firm also operates three venture capital funds and has invested in the now bankrupt exchange FTX.
Despite the massive drop, Multicoin’s hedge fund continued to grow 1,376 percent from its inception to 2022. While the broader crypto market is recovering from last year’s lows, Multicoin reported that the fund’s return increased by 100.9 percent in January 2023. Multicoin’s 2022 losses are due to assets stuck in FTX and availability in tokens directly affected by FTX, including exchange token FTT.
FTX impacted the market
According to the letter, in November 2022, the firm quickly created a “side pocket” (part of the main fund) for FTX-affected assets. This included stock-trapped assets that are currently trapped in bankruptcy lawsuits. This included Multicoin assets that were withdrawn from FTX just before the crash, which the letter said could be subject to buybacks by FTX property. The letter also details that Multicoin has taken new steps to “reduce counterparty risks.”
The Firm will simultaneously hold only 48 hours’ worth of trading assets on an exchange, adjust its collateral management practices to reduce the amount of collateral held on exchanges for derivative positions, and begin working with additional custodians to diversify custody risk. Multicoin says it “stays steadfast” in its long-term strategy and is “not trying to time the market.”
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