The outlook is bleak for Multicoin Capital's hedge fund after suffering a massive 90.4% loss in 2022, according to an investor letter. The firm, led by managing partner Kyle Samani, had invested in the now-bankrupt exchange FTX, as well as holdings in FTT and Solana-based tokens, which were severely impacted by the collapse.
In a letter to investors, Multicoin said the fund managed to dodge other bankruptcies in 2021, but could not avoid the "explosive revelations" of FTX or the "contagion" that followed. The firm's 2021 profits were drastically wiped out by the FTX meltdown.
In a separate letter to investors, Multicoin detailed its financial condition, revealing that the fund had 10% of its assets stuck on FTX. The hedge fund strategy, which invests in liquid tokens, launched in October 2017, and while the fund's losses in 2022 were its worst since inception, it is still up 1,376% net of fees since then.
The firm is now taking steps to mitigate counterparty risks by having limited trading assets on exchange, adjusting collateral management practices and onboarding with custodians. Despite the losses, Multicoin expressed that it remains steadfast in its long-term strategy and does not attempt to time the market.
Key Points
- Multicoin Capital's hedge fund lost 91.4% in 2022.
- The letter attributed last year's decline to a turbulent year for cryptocurrencies, and the collapse of crypto exchange FTX.
- The hedge fund had 10% of its assets stuck on FTX and holdings in tokens directly impacted by it.
- The fund is still up 1,376% net of fees from its inception.
- The firm is now taking steps to mitigate counterparty risks.
tl;dr
Multicoin Capital's hedge fund suffered a massive loss of 91.4% in 2022, due to the collapse of crypto exchange FTX, which the fund was exposed to. Despite this, the fund is still up 1,376% net of fees since its inception, and the firm is taking steps to mitigate counterparty risk.