Another Crypto Investor Is Calling Time After the Market Sank

Protocol Ventures LP, a US-based investor in crypto hedge funds, is to close down and return cash following the slide in the market for digital assets.

Protocol Ventures LP, a US-based investor in crypto hedge funds, is to close down and return cash. (AFP)

Protocol Ventures LP, a US-based investor in crypto hedge funds, is to close down and return cash following the slide in the market for digital assets, according to people familiar with the matter.

Notices were sent to investors at the end of October about the move, the people said, asking not to be named because the information isn't public. The closure will likely be completed by year-end 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% over the past year, the people said. Protocol declined to comment about the developments at the company.

Protocol Ventures is a fund of crypto hedge funds that invested in the likes of BlockTower Capital, Multicoin Capital, Pantera and Electric Capital. Protocol's decision to wind down comes amid a broad retrenchment in the digital-asset sector, which is reeling from a $2 trillion rout over the past year.

Crypto hedge funds soared in 2021 during a frenzy for speculative investments driven by huge injections of liquidity to ride out the worst of the pandemic.

But that outperformance is rapidly dissipating after central banks globally hiked interest rates to fight inflation. The hawkish shift dramatically tightened financial conditions and sapped the appetite for riskier investments.

The Bloomberg Cryptocurrency Hedge Fund Index has shed 45% this year, compared with a 9% retreat in the Bloomberg All Hedge Fund Index.