FTX Collapse and Turbulent Crypto Market Contribute to Multicoin Capital’s Hedge Fund Losses 91.4% in 2022

Multicoin Capital’s cryptocurrency hedge fund recorded a staggering loss of 91.4% in 2022, according to a letter sent to investors. The firm attributed the sharp decline to the unstable cryptocurrency market and the indirect and direct effects of FTX’s collapse. Multicoin Capital’s hedge fund strategy invests in liquid tokens, and the company operates three venture capital funds.

Despite the huge loss, Multicoin’s hedge fund remains up 1,376% net of fees from its inception through 2022. In January 2023, the fund recorded a gain of 100.9%, bringing the fund’s total return since inception to 2,866%. However, Multicoin’s losses in 2022 were due to assets stuck on FTX and holdings in tokens impacted by FTX, including the exchange token FTT.

To address the issue, Multicoin Capital created a side pocket in November 2022 to separate assets impacted by FTX, including those stuck on the exchange, which are now caught up in bankruptcy proceedings. The side pocket also included Multicoin assets withdrawn from FTX just before the collapse, which the letter says may be subject to clawbacks by the FTX estate. The firm has also taken steps to reduce counterparty risk and diversify its custodial risk by onboarding with additional custodians.

Despite the setback in 2022, Multicoin Capital remains committed to its long-term investment strategy and is optimistic about the future. The company’s managing partner, Kyle Samani, emphasized that Multicoin does not try to time the market and is dedicated to its investment strategies. A spokesperson for Multicoin Capital declined to comment on the matter.

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