Multicoin Capital, a crypto-focused hedge fund, has delivered exceptional returns to its investors, exceeding 9,000% since its inception in 2017. A recent annual investor letter revealed that the Multicoin Capital Master Fund has achieved a staggering return of 9,281% since October 1, 2017, with a remarkable 537% return in 2023 alone. This performance is primarily attributed to the resurgence of the cryptocurrency market, allowing the fund to capitalize on market opportunities and achieve significant outperformance. Despite experiencing a substantial 91.4% loss in 2022, the fund’s executives remain optimistic about the fund’s overall performance and view the challenges faced during the bear market cycle as inconsequential.
In response to Multicoin Capital’s success, other crypto funds are also seeing a surge in assets under management. Balance, a digital asset custodian in Canada, recently announced reaching $2 billion in assets under custody amid the recent crypto market recovery. Similarly, Korea Digital Asset (KODA), the largest institutional crypto custody service in South Korea, reported a significant growth in crypto assets under its custody, with the value expanding by nearly 248% in the second half of 2023. Analysts at Bernstein Research predict that crypto funds could reach $500 billion to $650 billion within the next five years, representing a substantial increase from the current valuation of around $50 billion.
Despite the impressive returns achieved by Multicoin Capital, some investors expressed concern about the significant losses incurred in 2022. A tweet mentioned that a 1000% return would be required to break even for those who invested towards the end of 2022, even though the fund has generated a return of 9128% since its inception. The fund’s performance figures include various investments made through side pockets, which have contributed to the overall outcome. Multicoin Capital’s executives, Tushar Jain, Kyle Samani, and Matt Shapiro, also discussed the crypto market’s behavior in the investor letter, highlighting the market’s rebound in 2023 and the fund’s ability to capitalize on opportunities.
In addition to Multicoin Capital’s success, other digital asset custodians and institutional crypto custody services are also seeing growth in assets under management. KODA, established through a collaboration between major Korean bank KB Bank, crypto venture capital firm Hashed, and blockchain tech firm Haechi Labs, reported a significant increase in the value of crypto assets under its custody, reaching approximately 8 trillion Korean won ($6 billion) by the end of last year. This growth reflects the overall positive trend in the crypto market, with institutions increasingly turning to digital assets as part of their investment strategies.
Looking ahead, the crypto fund industry is poised for significant growth, with analysts predicting a substantial increase in assets under management within the next five years. The recent success of funds like Multicoin Capital, coupled with the overall positive performance of the crypto market, bodes well for the industry’s future. As digital assets continue to gain mainstream acceptance and adoption, institutional investors are expected to allocate more capital to crypto funds, further fueling the industry’s growth and expansion.
