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Multicoin Capital’s hedge fund misplaced 91.4% in 2022, in keeping with a replica of the agency’s annual investor letter considered by CoinDesk.
The letter attributed final 12 months’s decline to a turbulent 12 months for cryptocurrencies, in addition to direct and oblique affect from the collapse of crypto alternate FTX.
“Whereas the fund efficiently dodged the catastrophic implosions of LUNA and Three Arrows Capital earlier within the 12 months, we didn’t keep away from the explosive revelations about FTX nor the next contagion that unfold throughout the market,” mentioned the letter. “After a exceptional 12 months in 2021, our efficiency in 2022 was the worst since inception.”
In a separate letter to buyers final November, Multicoin detailed the monetary situation of its hedge fund, revealing that the fund had 10% of its belongings caught on FTX, in addition to vital publicity to FTT, SOL and SRM, all tokens that noticed steep sell-offs final November.
Multicoin Capital, headed by managing companion Kyle Samani, launched its hedge fund technique in October 2017, which invests in liquid tokens. The agency additionally operates three enterprise capital funds, and has invested within the now-bankrupt alternate FTX.
Regardless of the huge drawdown, Multicoin’s hedge fund stays up 1,376% web of charges from its inception by 2022. Because the broader crypto market rebounded from final 12 months’s lows, Multicoin reported that the fund gained 100.9% in January 2023, bringing the fund’s inception-to-January return to 2,866%.
Multicoin’s 2022 losses stem from the belongings caught on FTX and holdings in tokens instantly impacted by FTX, together with the alternate token FTT. In keeping with the letter, in November 2022, the agency rapidly created a aspect pocket (a carveout of the primary fund) for belongings impacted by FTX. This included belongings caught on the alternate, which are actually ensnared in chapter proceedings. The aspect pocket additionally included Multicoin belongings withdrawn from FTX simply previous to collapse, which the letter says could also be topic to clawbacks by the FTX property.
The letter additionally particulars that Multicoin has taken new steps to “mitigate counterparty dangers.” The agency will solely maintain 48 hours price of buying and selling belongings on an alternate at a time, adjusted collateral administration practices to scale back the quantity of collateral held on exchanges for derivatives positions, and is onboarding with further custodians to diversify custodial threat.
Multicoin says it “stays steadfast” in its long run technique and “doesn’t try to time the market.”
A spokesperson for Multicoin Capital declined to remark.
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