Key Takeaways
- • Crypto hedge fund Adaptive Capital is shutting down and plans to return remaining capital to its Limited Partners, according to an investor letter reviewed by The Block.
- • The firm cited a steep bitcoin price drop of more than $1,000 on March 13, 2020, and blamed "infrastructural insufficiencies" for its inability to respond to the sell-off.
- • Two sources told The Block that Adaptive came out of the drawdown down more than 50%, despite a pitch deck claiming a 552.77% gain from October 3, 2018 to May 3, 2019.
- • BitMEX, where Adaptive held accounts that were liquidated, experienced an outage of about 45 minutes during the sell-off, which the exchange attributed to a "hardware issue" with its cloud provider.
- • The closure comes as traditional hedge funds also struggle, with Bridgewater Associates' Pure Alpha fund reported down about 21% amid coronavirus-linked market turmoil.
Summary
Adaptive Capital, a crypto hedge fund, is closing operations and will return its remaining funds to investors, The Block reported, citing an investor letter it reviewed. The firm said in the letter that "the risks of continuing operations in such an unstable environment outweigh the potential benefits."
The decision follows a sharp fall in bitcoin's price during the March 12-13 trading session. The digital asset dropped by more than $1,000 on March 13 after a period of relative calm compared with U.S. equities, where the Dow Jones Industrial Average had been in free-fall since the start of the month. Adaptive attributed its failure to respond to the sell-off to "infrastructural insufficiencies," noting that "a number of respectable exchanges, platforms, and tools that we use daily have halted their operations during the selloff."
BitMEX, which was not named in the letter, experienced an outage of roughly 45 minutes during the plunge. The exchange said a "hardware issue" with its cloud service provider delayed requests between 02:16 and 02:40 UTC, with normal service resuming at 03:00 UTC. Sources told The Block that Adaptive maintained accounts on BitMEX, which were liquidated.
Two sources familiar with the firm's business told The Block that Adaptive came out of the drawdown down more than 50%. That figure contrasts with a pitch deck reviewed by The Block showing the fund up 552.77% from October 3, 2018 through May 3, 2019. The deck also said the firm's market-timing ability rested on proprietary indicators built on data from the majority of the largest blockchain networks in real time. The firm made one bullish call in 2018, on December 7, according to the deck; bitcoin's value has risen more than 50% since that date.
Adaptive is led by Murad Mahmudov, a Princeton graduate who previously worked briefly at Glencore and Goldman Sachs and has more than 70,000 Twitter followers. Mahmudov did not respond to an emailed request for comment by press time.
The closure also occurs amid broader hedge fund losses. According to an investor letter reviewed by The Block, $160 billion Bridgewater Associates' "All Weather" and Pure "Alpha" funds are down on a net basis, with the Pure Alpha (18% vol) fund down about 21%.
The decision follows a sharp fall in bitcoin's price during the March 12-13 trading session. The digital asset dropped by more than $1,000 on March 13 after a period of relative calm compared with U.S. equities, where the Dow Jones Industrial Average had been in free-fall since the start of the month. Adaptive attributed its failure to respond to the sell-off to "infrastructural insufficiencies," noting that "a number of respectable exchanges, platforms, and tools that we use daily have halted their operations during the selloff."
BitMEX, which was not named in the letter, experienced an outage of roughly 45 minutes during the plunge. The exchange said a "hardware issue" with its cloud service provider delayed requests between 02:16 and 02:40 UTC, with normal service resuming at 03:00 UTC. Sources told The Block that Adaptive maintained accounts on BitMEX, which were liquidated.
Two sources familiar with the firm's business told The Block that Adaptive came out of the drawdown down more than 50%. That figure contrasts with a pitch deck reviewed by The Block showing the fund up 552.77% from October 3, 2018 through May 3, 2019. The deck also said the firm's market-timing ability rested on proprietary indicators built on data from the majority of the largest blockchain networks in real time. The firm made one bullish call in 2018, on December 7, according to the deck; bitcoin's value has risen more than 50% since that date.
Adaptive is led by Murad Mahmudov, a Princeton graduate who previously worked briefly at Glencore and Goldman Sachs and has more than 70,000 Twitter followers. Mahmudov did not respond to an emailed request for comment by press time.
The closure also occurs amid broader hedge fund losses. According to an investor letter reviewed by The Block, $160 billion Bridgewater Associates' "All Weather" and Pure "Alpha" funds are down on a net basis, with the Pure Alpha (18% vol) fund down about 21%.
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