Home Cryptocurrency Multicoin Expects FTX Contagion Dangers For Weeks To Come

Multicoin Expects FTX Contagion Dangers For Weeks To Come


In a letter to its investors, one of the industry’s most notable crypto venture firms, Multcoin Capital, has revealed its thesis for the coming weeks.

Managing partners Kyle Samani and Tushar Jain write in a 3,400-word letter that the FTX fiasco does not spell doom for the crypto industry, as critics like Peter Schiff and Nassim Taleb recently did.

“Just as Lehman Brothers didn’t kill banking and Enron wasn’t the death of energy companies, FTX won’t be the end of the crypto industry,” the venture capital firm said.

At the same time, the firm warns its investors that FTX’s collapse will cause more fallouts. Samani and Tushar wrote:

We expect to see contagion fallout from FTX/Alameda over the next few weeks.

Many trading firms will be wiped out and shut down, which will put pressure on liquidity and volume throughout the crypto ecosystem. We have seen several announcements already on this front, but expect to see more.

According to Multicoin, leverage must first be removed from the system before there will be “green shoots next year.”

Multicoin Trusted FTX

Samani’s company also acknowledged its own mistakes, though. Thus, it had placed “too much trust” in FTX. As a result, Multicoin lost 15.6% of its total fund assets on FTX.

The venture firm was only able to recover about a quarter of its funds that were deposited on the exchange. Although waiting to see how the bankruptcy proceedings progress, the company expects to write down its investment in FTX to zero.

In doing so, Multicoin follows the fate of other investors in FTX, such as Temasek, Sequoia Capital and Softbank.

Due to the loss of confidence, Multicoin said it is only trading on two other exchanges, Coinbase and Binance. For now, however, the company only relies on Coinbase custody and self-managed cold wallets, it said.

The Future Of Solana (SOL)

By its own account, Multicoin has invested a large amount in Solana (SOL). The token was one of the biggest sufferers in the FTX collapse, as SOL was one of FTX’s largest positions along with FTT.

On November 05, SOL was still trading at a price of $38.71 on Binance before the steep crash to currently $13.53 took place.

SOL USD 2022-11-18
SOL saw an unprecedented drop following the first FTX rumors. Source: TradingView

Despite the heavy losses, Multicoin officially still believes in Solana’s long-term potential, according to its letter to investors. The venture firm said it’s holding its position and still expects a bright future for Solana, because the cryptocurrency has “one of the most vibrant developer communities.”

Based on our experience in 2018 and 2020, we learned that it’s not prudent to sell an asset during a short-lived crisis if the core thesis is not impaired,” the letter states.

However, there is a juicy (unconfirmed) rumor circulating that Samani and Jain handled his personal funds differently. Allegedly, the general partners sold their personal SOL stashes near the top.





Source link

RELATED ARTICLES

Lessons we learned from the Terraform-FTX implosions

In May 2022, Terraform Labs’ LUNA cryptocurrency and TerraUSD (UST) stablecoin collapsed, triggering a massive shock in the crypto industry. Six months later,...

Kazakhstan Presses On With Restrictive Bitcoin Mining Regulation

A bill that would create new licensing and electricity purchase requirements has been sent on to a third vote.A bill that would create...

Crypto.com Releases Audited Proof of Reserves

Crypto.com, which was founded in 2016, has joined the train of cryptocurrency exchanges that have released their Proof of Reserves (PoR) in the aftermath...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Energy stocks down sharply as U.S. crude oil suffers biggest slide since April

SlavkoSereda/iStock via Getty Images Crude oil futures have surrendered all gains for the year, posting their largest weekly...

Joseph Kittinger, who set longtime parachute record, dies

FORT LAUDERDALE, Fla. -- Retired Air Force Col. Joseph Kittinger, whose 1960 parachute jump from almost 20 miles (32 kilometers) above the Earth...

Recent Comments