20 days ago 2 min read

Multicoin Capital Hedge Fund Experienced 91.4% Loss in 2022

multicoin capital-hedge funds-luna-ftx-solana

The FTX disaster's aftereffects are still being felt. Multicoin Capital's loss in 2022 may be as high as 91.4%.

In the letter, Multicoin Capital said plainly:

“While the fund successfully dodged the catastrophic implosions of LUNA and Three Arrows Capital earlier in the year, we didn’t avoid the explosive revelations about FTX nor the subsequent contagion that spread across the market. After a remarkable year in 2021, our performance in 2022 was the worst since inception.”

One of the biggest and most established investment management companies in the cryptocurrency industry, Multicoin Capital is well known for being a very smart investment management organization.

Its managing partner Kyle Samani developed a hedge fund strategy to invest in liquidity tokens in October 2017. Multicoin Capital also invested in the now-defunct exchange FTX and oversees three venture capital firms.

In reality, Multicoin Capital had ownership in FTX.US, committed some assets to FTX, and also placed some disastrous bets, including a long-term bullishness on Solana's native token SOL and Solana-based asset Mango, as well as a significant number of incomplete derivatives product contracts.

After learning of FTX's insolvency, Multicoin Capital's flagship fund had a 55% decrease in value in just two weeks, excluding liquidity and other self-financed funds.

Although the values of these tokens have lately fallen precipitously, Multicoin Capital disclosed its financial situation in detail in another investor letter in November of last year, revealing that FTX owns almost 10% of its assets and that it has a sizable amount of FTT, SOL, and SRM.

In addition, Multicoin has taken additional steps to "mitigate counterparty risks," the letter claims.

The company has modified its collateral management procedures to reduce the amount of collateral maintained on exchanges for derivatives positions, will only retain 48 hours' worth of trading assets on an exchange at a time, and is bringing on new custodians to diversify custodial risk.

According to information provided by the fund in a letter to investors, the position of Multicoin Capital may not be as dire as one may think. Despite the fact that the fund's size has drastically decreased from its founding till 2022, the fund's growth rate is still 1.376%.

The cryptocurrency market entered 2023 and immediately experienced a surge of short-term low-point recovery, which helped its funds increase by 100.9% in January of this year.

The growth rate was 2.866% from the start to January 2023. The business maintained that it has a long-term plan for the future.

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