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Multicoin Capital’s hedge fund misplaced 91.4% in 2022, in response to a duplicate of the agency’s annual investor letter seen by CoinDesk.
The letter attributed final yr’s decline to a turbulent yr for cryptocurrencies, in addition to direct and oblique affect from the collapse of crypto change FTX.
“Whereas the fund efficiently dodged the catastrophic implosions of LUNA and Three Arrows Capital earlier within the yr, we didn’t keep away from the explosive revelations about FTX nor the next contagion that unfold throughout the market,” stated the letter. “After a outstanding yr in 2021, our efficiency in 2022 was the worst since inception.”
In a separate letter to investors 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 associate 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 change FTX.
Regardless of the large drawdown, Multicoin’s hedge fund stays up 1,376% internet of charges from its inception by 2022. Because the broader crypto market rebounded from final yr’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 straight impacted by FTX, together with the change token FTT. In accordance 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 change, 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 The aspect pocket additionally included Multicoin belongings withdrawn from FTX simply previous to collapse, which the letter says could also be topic to clawbacks by the FTX property.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 value of buying and selling belongings on an change at a time, adjusted collateral administration practices to cut back the quantity of collateral held on exchanges for derivatives positions, and is onboarding with further custodians to diversify custodial danger.
Multicoin says it “stays steadfast” in its long run technique and “doesn’t try and time the market.”
A spokesperson for Multicoin Capital declined to remark.