Key Points:
According to the firm’s annual investor letter, Multicoin Capital’s hedge fund lost 91.4% in 2022.
The letter ascribed last year’s drop to the direct and indirect effects of the crypto exchange FTX’s demise.
The fallout from the FTX catastrophe has not yet subsided. According to the most recent leak of a copy of the annual investor letter viewed by CoinDesk, Multicoin Capital’s loss in 2022 might be as high as 91.4%.
Multicoin Capital said frankly in the letter:
“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.”
Multicoin Capital is one of the largest and oldest investment management firms in the crypto company, and it is widely regarded as a very astute encryption investment management firm.
In October 2017, its managing partner, Kyle Samani, created a hedge fund strategy aimed at investing in liquidity tokens. Multicoin Capital also manages three venture capital funds and invested in the now-defunct exchange FTX.
In truth, Multicoin Capital not only committed certain assets to FTX but also made some bad bets, such as long-term bullishness on Solana’s native token SOL and Solana-based asset Mango, while also holding FTX.US ownership and a large number of incomplete derivatives product contracts.
Multicoin Capital’s flagship fund lost more than half of its money in only two weeks after news of FTX’s bankruptcy surfaced, representing a 55% decline at the time, excluding liquidity and other self-financed funds.
Multicoin Capital detailed its financial status in another investor letter in November last year, disclosing that FTX controls around 10% of its assets, and it has a substantial number of FTT, SOL, and SRM, although the prices of these tokens have recently plummeted drastically.
Multicoin has also made further efforts to “mitigate counterparty risks,” according to the letter.
The company will only hold 48 hours’ worth of trading assets on an exchange at a time, has changed collateral management methods to limit the amount of collateral held on exchanges for derivatives positions, and is onboarding new custodians to diversify custodial risk.
The situation of Multicoin Capital may not be as bad as one imagines, according to data revealed by the fund in its letter to investors, although the fund size has shrunk significantly since its inception until 2022, Multicoin hedge fund has already deducted fees, the growth rate of the fund is still 1.376 %.
After entering 2023, the crypto market has ushered in a wave of short-term low-point recovery, which has boosted Its funds to be up 100.9% in January of this year.
From its inception to January 2023, the growth rate has reached 2.866%. The company still said it has a long-term strategy for the coming time.
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Harold
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