The FTX contagion spreads fast and wide! Multicoin Capital, a crypto venture capitalist, informed its investors on Thursday, November 17 that the fund’s collapse caused it to drop by a staggering 55% in the last month. Multicoin believes there is a chance to recover some of its assets from FTX. However,
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The FTX contagion spreads fast and wide! Multicoin Capital, a crypto venture capital firm, informed its investors on Thursday, November 17th that the fund’s collapse caused it to drop by a staggering 55% in the last month.
Multicoin believes there is a chance that some of its assets could be recovered from FTX in future. Multicoin Capital prefers that FTX assets be written down to zero, as FTX is currently in bankruptcy proceedings. The crypto venture firm did not specify the exact amount it was writing off as a result of FTX’s collapse. Market experts believe this to be more than $850 million.
Multicoin managing partners Tushar Jain and Kyle Samani wrote that they had placed too much trust in their relationship with FTX. We had too many assets in FTX.”
Multicoin Capital had assets of $863m on FTX.
— Peter McCormack (@PeterMcCormack), November 18, 2022
Multicoin, which launched its $430 million fund in August, is now facing a major blow. The firm was able to recover about one-quarter its assets from FTX last week, as the collapse of FTX was unfolding. It still holds close to 15% of the fund’s assets on FTX.
Multicoin Capital had spread all its funds across three exchanges, including Binance, FTX and Coinbase. The crypto venture fund now has 100% of its assets in Coinbase or self-custody. According to the company:
“The fund does not have assets that are exposed to other counterparties at the moment. We expect some diversification in custodial exposure in the future – Coinbase is expected to remain our primary custodian. We will resume trading with other counterparties while we continue to evaluate the market fallout.
Many Trading Firms Could Be Hit by FTX Contagion
Multicoin Capital believes the worst is yet to come before things get better. Alameda Research, the world’s second-largest cryptocurrency exchange, and Multicoin Capital could lead to more trading firms being shut down. The crypto venture firm wrote this in a letter to investors:
“We expect to see contagion from FTX/Alameda in the next few weeks. Many trading firms will be shut down and wiped out, which will impact liquidity and volume in the crypto ecosystem. This announcement is not the first. We expect more.
Multicoin’s losses are not limited to FTX. Multicoin was holding a large position in Solana (SOL), a crypto venture firm, whose value has plummeted by 65% over the past 12 days.
Multicoin stated that it would keep Solana because it has “one the most vibrant developer communities”. The firm stated that it had learned from its experience in 2018-2020 that it is not prudent to sell assets during a crisis.
According to the crypto venture giant, the FTX crash is not the end for the crypto market. The letter stated that as the leverage is removed from the system, “we expect to see green shoots next Year.”
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