Multicoin Capital, a crypto-focused hedge fund, has experienced extraordinary returns of over 9,000% since its launch in 2017. Despite significant losses in 2022 that nearly wiped out its value, the fund has seen a dramatic turnaround in its fortunes. The fund’s annual investor letter revealed a staggering return of 9,281% since its inception, with a remarkable 537% return in 2023 alone. A Form ADV is anticipated to be filed by the firm, as per regulatory requirements, with assets under management previously reported at over $1.36 billion.
In 2022, Multicoin Capital’s hedge fund experienced a substantial 91.4% loss, requiring a 1000% return to break even. The impressive returns achieved since the fund’s inception have more than compensated for this loss, with various investments made through side pockets contributing to the overall outcome. Despite the challenges faced during the bear market cycle, the firm’s executives view that period as ultimately inconsequential for the investment firm. They acknowledged challenges such as macro tightening, a directed political vendetta, and the fallout from a significant financial fraud, including the collapse of crypto exchange FTX to which they were exposed.
Crypto funds have seen a surge in assets under custody amid the recent recovery in crypto markets. Balance, a digital asset custodian based in Canada, has achieved $2 billion in assets under custody. Similarly, Korea Digital Asset (KODA), the largest institutional crypto custody service in South Korea, has experienced remarkable growth in assets under its custody, with a nearly 248% expansion in the second half of 2023. Founded through a collaboration between major Korean bank KB Bank, crypto venture capital firm Hashed, and blockchain tech firm Haechi Labs, KODA reported assets reaching approximately 8 trillion Korean won ($6 billion) by the end of last year.
Analysts at Bernstein Research predict that crypto funds could reach a valuation of $500 billion to $650 billion within the next five years, a significant leap from the current valuation of around $50 billion. The resurgence of the cryptocurrency market has been a key driver behind the growth in assets under custody for crypto funds, with significant returns being generated for investors. Multicoin Capital’s executives highlighted the market’s behavior in 2023, where cryptocurrencies rebounded spectacularly, allowing the hedge fund to capitalize on the market’s overreaction and achieve significant outperformance.
Overall, the future looks promising for crypto funds as they continue to see impressive growth in assets under custody and returns for investors. Multicoin Capital’s remarkable performance and turnaround in fortunes serve as a testament to the potential of the crypto market and the opportunities it presents for investors looking to capitalize on the industry’s growth. With the continued surge in crypto investments and market recovery, the outlook for crypto funds remains positive, with the potential for substantial growth in the coming years.
