- Multicoin recorded a 100.9% gain for the fund in January 2023.
- The letter goes on to describe the various measures Multicoin has implemented.
A copy of Multicoin Capital’s yearly investor letter revealed a 91.4% loss for the hedge fund in 2022. The fall was blamed in the letter on the tumultuous year for cryptocurrencies and the direct and indirect effects of the FTX crypto exchange’s closure.
The letter stated:
“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.”
Contagion Effect of FTX Crash
Multicoin disclosed the financial state of its hedge fund in a separate letter to investors in November, saying that 10% of the fund’s assets were trapped on FTX and that it also had considerable exposure to FTT, SOL, and SRM, all tokens that witnessed strong sell-offs at the time.
In addition to investing in the defunct FTX exchange, the company manages three separate venture capital funds. Multicoin’s hedge fund is still up 1,376% from inception until 2022, after deducting fees. Multicoin recorded a 100.9% gain for the fund in January 2023, bringing the total return since inception to 2,866%. This increase coincided with the general crypto market’s recovery from last year’s lows.
The company reportedly moved swiftly in November 2022 to set up a separate fund for FTX-affected assets. This includes exchange-held assets that had been embroiled in insolvency.
The letter goes on to describe the various measures Multicoin has implemented to “mitigate counterparty risks.” To lower the amount of collateral kept on exchanges for derivatives contracts, the company has changed its collateral management methods and is onboarding new custodians to increase its custodial risk diversification.
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