Protocol Ventures LP, a US-based crypto hedge fund investor, is set to close and return cash following the decline in the digital asset market.
Protocol Ventures LP, a US-based investor in crypto hedge funds, is set to close and return cash following the decline in the digital asset market, according to people familiar with the matter.
Notices were sent to investors about the move in late October, the people said, asking not to be named as the information is not public. The shutdown is likely to be completed by the end of the year or the first quarter of 2023, one of the people said.
Investors in Protocol’s fund of hedge funds may have lost as much as 90% in the past year, people said. Protocol declined to comment on developments at the company.
Protocol Ventures is a fund of crypto hedge funds that have invested in BlockTower Capital, Multicoin Capital, Pantera and Electric Capital. Protocol’s decision to wind down comes amid a wide-ranging austerity in the digital asset sector, which has teetered from a $2 trillion loss in the past year.
Crypto hedge funds soared in 2021 amid a frenzy for speculative investments, propelled by massive liquidity injections to overcome the worst of the pandemic.
But that outperformance quickly disappears after central banks around the world raised interest rates to fight inflation. The aggressive shift dramatically tightened financial conditions and curbed the appetite for riskier investments.
The Bloomberg Cryptocurrency Hedge Fund Index is down 45% this year, compared to a 9% drop in the Bloomberg All Hedge Fund Index.