After the losses at 3AC, executives from Genesis and Galaxy have decided to set up a new fund to invest in cryptocurrencies, and are looking to raise $500m to do do so.
Firms adjust to 3AC collapse
In light of the collapses of Three Arrows Capital, BlockFi, Celsius, Terra, etc., the cryptocurrency industry has had to adjust to a new paradigm.
A lot (but by no means all) of the exuberance and irrationality has been taken out of the system. People who borrowed too much have been liquidated, and people who took undercollateralised
loans have been taken to the cleaners.
Interest rate rises have affected traditional markets heavily, and most countries around the world are now in a recession – although not officially, since the “official” definition of recession continually changes to satiate Keynesian notions of “animal spirits”.
As such, firms have been forced to contend with the reality of their former hubris, and those who haven’t been able to weather the storm have been destroyed.
The actions of companies like Three Arrows Capital caused a domino effect that rippled throughout the industry and destabilised a lot of players whose interests were nearly inextricably intertwined.
Raising a lot in a down market
A lot of companies struggle to raise as much as they would like when the markets are down – it is simply easier to raise more money when the markets are bullish and people can feel the hype.
However,that ought not be a problem for the Genesis and Galaxy executives, who still have access to networks with vast pools of capital.
There are actually several advantages to raising a lot of funding when the markets aren’t performing as well.
Andreesen Horowitz, one of the first funds to invest heavily into the space during the previous market, was one of the only large funds to do so at the time.
Their entrance into the space meant that they had a lot of access to the best deals and were able to enter into them fairly unopposed and without much competition. There was less to look for, but everything was cheaper.
Bear markets are the best time to accumulate
Another reason why it is so beneficial to invest at a time like this is because we are in a bear market at the moment.
Bear markets, when Bitcoin has receded 70-80% and w hen alts are down even further, are usually brilliant opportunities to enter the market and to acquire assets at a significant discount.
Depending on the state of the market when the fund is ready to be launched, and depending on the strategies and mandates employed by the fund, the partners could be on course to earn a significant amount of money in fees, commissions and bonuses.
Accordingly to a filing made with the Securities and Exchange Commission, DBA Crypto is to be the name of the new fund and many hard-hitters will be working for the company.
Michael Jordan (Galaxy’s co-head of investments), Joshua Lim (Genesis’ head of derivatives), Roshun Patel (Genesis’ former vice president of trading) and Shane Barratt (CEO and founder of Convex Trading) are all to be taking key roles in managing and growing the fund going forward, and have all been named as general partners.
The move shows that even though some companies are suffering, individuals who think outside the box and are ambitious are not being dissuaded from further forays into the world of investing in crypto.
Only last week, Genesis announced that their CEO Michael Moro would be stepping down as part of the company’s restructuring process after losing billions of dollars in unsecured loans made to 3AC. Now, it seems that they have the ambition and determination to bounce back stronger than ever.
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