Pantera Capital forecasts a tough period ahead as the market exhibits a long-term bearish trend. The hedge fund which gained prominence for returning 25000 percent by the end of 2017, found its crypto fund losing 45.7% in March alone, according to an investor letter on Tuesday.
The investor letter which was seen by CNBC, quotes Joey Krug, co-chief investment officer of Pantera Capital explaining to the investors that March was the toughest month for the hedge fund’s history. “This was a really rough month for the Digital Asset Fund and the space in general, we’re in a market with around 100 percent annualized volatility and this month was the worst month in our model’s 27-month history”, reads part of the letter.
Pantera Capital, which has about $724 million under management, stressed that since the first day of December last year, its crypto fund fell only 3.1%, compared to BTC’s decline of 37.4% for the same period. However, last month, Digital Asset Fund dropped over 45% while Bitcoin lost 34%.
This is how Krug put it:
This performance is basically in line with our expectation given the huge move in the market as a whole.
Poor Bitcoin Performance and Taxation
Beginning March 1st to the close of business on April 1st, Bitcoin fell by about 34 percent. The coin had started the month above $10,000 but started to slip towards $6000 due to a number of regulatory announcements from South Korea, India, and The Netherlands among others, and unfavorable news such as the Coincheck hack.
Bitcoin had a record year in 2017 with the cryptocurrency gaining more than 1,300 percent to almost $20,000 in December. That helped Pantera, which was started in 2013, to return about 25,000 percent as of last December. Its Bitcoin Fund is down by more than 50 percent this year but has still returned more than 10,000 percent life to date, according to the letter.
According to Pantera’s letter to investors, Digital Asset Fund fell 54.9% year-to-date but is still up 10.3% since its launch. Pantera’s ICO Fund has lost over 50% YTD but is up 92.7% life-to-date. Its long-term ICO fund is in a better position – it fell 1% this year and has gained 5% since its inception.
In the US, crypto trades are taxed as capital gains, and the hedge fund noted that the current price is influenced by investors who have to meet their tax obligations.
A portion of the selling pressure on the market in general has been unintended tax positions,
-Dan Morehead, CEO and co-chief investment officer of Pantera Capital, wrote in the letter. He further added, “There were $300 billion of capital gains created last year. That could have caused a decent chunk of the sales”.
The letter says Bitcoin contributed the largest portion of Pantera’s negative performance, followed by Ethereum, Dash, and Waves.
In the letter, Pantera announced an investment in an Ethereum competitor but the name was not given.
What do think are the major causes of Pantera’s huge loses? Share your thoughts with us in the comments section.