![]() More broadly, we expect further price volatility across the crypto ecosystem as fears of contagion drive asset holders to adjust their portfolios. In the short term, there will be pain for those who lost funds held on FTX’s exchange. ![]() Our initial impression is that this limited exposure is partially attributable to the proactive risk management and custody/treasury management practices that we seek out, and regularly emphasize with, our founders, but we expect the coming weeks and months will lend more insights. After speaking with, or receiving an investor update, the large majority of contacted portfolio teams reported that they have little to no counterparty or custodial exposure to FTX/Alameda. We identified and reached out to portfolio teams from our universe of early-stage token and blockchain venture companies that we determined could have potentially significant counterparty or custodial exposure to FTX/Alameda. surviving and emerging stronger on the other side of this crisis. In times of crisis, “we must act and act quickly.” Speed can make all the difference for a business being caught in the contagion to come vs. We have conducted this exercise in similarly stressed environments for our industry (e.g., Three Arrows bankruptcy, 2018 crypto winter). Our goal was 1) to identify the potential risks that our portfolio teams may be exposed to and 2) to reach out to at-risk teams directly and offer any help we can. Prior to the collapse, on Monday night, our FTX equity and FTT token positions totaled under 3% of our total firm AUM.įollowing the news of FTX/Alameda’s distressed status on Tuesday morning, our team immediately assembled a virtual war room to assess the impact to our early-stage portfolio and take action. We liquidated as much of this FTT as possible on Tuesday, November 8th. Our main risk/losses from the FTX event come from our Blockfolio acquisition proceeds, which were denominated in FTT and FTX stock. Our approach is to aim to have little exposure to centralized counterparties in general while maintaining some flexibility to trade. The main thing we aim to avoid in situations like this is losing assets in a way where the assets are gone permanently, where you never get them back. The markets are down a lot on this news, and that’s going to show up in our performance, but when the markets bounce back, we expect to too. But first and foremost, our objective is to mitigate the risk of permanent capital loss. Then, once we’ve taken every possible measure, we can update our LPs on what we’ve done and what things look like for our funds. In general, our approach towards situations like these first focuses on safeguarding the portfolio as much as possible. This likely means those with funds on FTX lose most of their money. ![]() Deposits on FTX are trading at pennies on the dollar. The total losses from this are unclear, but online estimates suggest it’s in the high single digit billions. Both firms have filed for bankruptcy as of this morning. The summary is that this week, FTX and Alameda Research over-levered by borrowing against their FTT token. We want to provide an update on the FTX situation and how it has and hasn’t affected us.
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