Pantera Capital's Liquid Token Fund Hit Hard in 2022; Partial Recovery in January

Pantera Capital's liquid token fund has experienced a significant recovery this month, with a gain of over 47%, following a sharp decline of 80% in 2022, largely due to the FTX collapse. The fund's portfolio, which initially consisted of 15-25 liquid tokens, was heavily impacted by the November market downturn, but strategic shifts, including transitioning towards ether (ETH), have contributed to its recent rebound.

Pantera Capital's Liquid Token Fund Suffers Significant Losses in 2022, Despite Recent Recovery

The crypto-focused venture capital firm Pantera Capital has disclosed substantial losses in its liquid token fund during 2022, primarily attributed to the collapse of centralized exchange FTX.

According to the firm's January investor call, the Pantera Liquid Token Fund, which invests primarily in liquid tokens within the decentralized finance (DeFi) ecosystem, experienced an 80% decline in value over the course of the year. The fund was particularly hard hit in November, losing nearly 23% during the month.

In contrast to the fund's significant losses, the Bloomberg Galaxy Crypto Index declined by approximately 27% over the same period. However, the Pantera fund has staged a partial recovery in January, gaining over 47% since the start of the month.

The fund's investment strategy involves maintaining a diversified portfolio of 15 to 25 liquid tokens, focusing on discretionary allocation decisions within the DeFi space. At the time of the investor call, the fund had $198 million in assets under management, distributed across 13 tokens.

Pantera's co-chief investment officer, Joey Krug, explained during the call that the fund began shifting its portfolio away from altcoins and into Ether (ETH) in the late spring. This strategic adjustment coincided with the collapse of Terra's stablecoin and sister coin, Luna, which triggered a cascade of negative events within the crypto industry.

The fund's top-performing assets during the challenging November period included Cosmos' ATOM token, Chainlink's LINK token, and Optimism's OP token. Uniswap's UNI token, Solana's SOL token, and Ether were among the underperformers. Krug revealed that Pantera had held a position in Solana and sold "a lot of it" immediately following the FTX collapse, exiting at around $20 per token before it declined further to around $10.

Layer 2 scaling solution Optimism has emerged as one of the fund's largest non-ETH positions and has been a key contributor to its year-to-date growth alongside Ether and UNI.

"We're just starting now, recently, to start to rotate back into some alts that we think are going to outperform ETH over the coming cycle," Krug stated.

The Pantera Liquid Token Fund's recent losses highlight the volatility and inherent risks associated with cryptocurrency investments. Despite the fund's partial recovery in January, it remains to be seen whether it can sustain its upward trajectory and mitigate the impact of ongoing market headwinds.