The asset under management (AUM) of Polychain Capitals, a cryptocurrency-focused hedge fund, saw a steep drop in Q4 2018, falling from an impressive $1 billion to a mere $594.5 million, according to a recent US Securities and Exchange Commission (SEC) filing by the company.
According to the Wall Street Journal, which first reported the news, the sharp decline was caused by a fall in “the value of its holdings” forced by the year-long bear market in the cryptocurrency space, “rather than.. redemptions by [its] investors.”
According to filings submitted to SEC, the San Francisco-based hedge fund reported $967.8 million in AUM in August of last year, marking a loss of $373.3 million.
“There is no assurance that digital assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of digital asset payments by mainstream retail merchants and commercial businesses will grow,” the latest SEC filing noted.
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A Volatile Asset Class
Founded in 2016, Polychain Capitals quickly grabbed headlines as it was founded by Olaf Carlson-Wee, one of the first employees of Silicon Valley-based Coinbase. Last year, Polychain became the first crypto-linked fund with more than $1 billion in assets under management, including cryptocurrency coins and tokens, equity in companies and unspent cash pledged from investors.
However, 2018 price dips have been bad news for Polychain and other crypto investment vehicles, forcing many to shut and others to explore creative ways to stay afloat.
While the San Francisco-based firm saw a roughly 40 percent drop in the value of its AUM between August and December of last year, the total market capitalization of the cryptocurrency market dropped by just over 50 percent in the same period, according to data from Coinmarketcap.com.
“This asset class has always been incredibly volatile. It’s grown in bits and starts, with very rapid increases and then bear markets… When I launched Polychain Capital I was prepared for this,” Carlson-Wee said earlier this year.