Investor Lost Nearly $250,000 After His Crypto Hedge Fund Collapsed

The effects of the coronavirus and COVID-19 pandemic that swept the world are still present. In today’s latest cryptocurrencies news, we are sharing a story about how one investor lost nearly $250,000 after he invested the money in a crypto hedge fund, but it collapsed during the market meltdown.

Basically, the investor handed $250,000 to a cryptocurrency hedge fund last summer. His investment shed almost 99% of its value during the coronavirus sell-off in March, as he told the Financial Times.

“I don’t really know what happened” as Vlad Matveev told the newspaper. “They said they had a diversified set of strategies.”

The investor also outlined Cryptolab Capital’s explanation of what happened in a Medium blog post in late March. As he said, the fund’s algorithm plowed an amount equal to three times its managed assets into XBT/USD, a leveraged trading product which allows investors to speculate on the Bitcoin-to-dollar exchange rate.

When the market plunged, the investor lost 99% of his investment, and the managers tried to reduce their position but were thwarted by a lack of liquidity. Their sell orders were rejected, as Matveev noted, and the exchange ultimately auto-liquidated all positions on March 12, as he added.

Cryptolab Capital did not immediately respond to a request for comment from Markets Insider. However, it is clear that the situation with the coronavirus news and COVID-19 taking over the world has resulted in numerous crashes on both the stock and crypto markets. In fact, the results of these crashes are still present.

Crypto funds, for instance, trailed conventional hedge funds in March, as the latter lost around 8.4% on average, the Financial Times reported. Investing in cryptocurrencies like Bitcoin and others incurred a drop of only 60%, which proves the point that crypto investments are more stable than (some) hedge funds.

We can see that this investor lost 99% of his $250,000 in a hedge fund. However, if he decided to put the money in Bitcoin (BTC), he would have lost 60% of his investment. The most important part, however, is that Bitcoin regained its position in a very quick period and is now trying to breach the $10,000 mark. Stocks and hedge funds, on the other hand, are still battling with losses and the effects of the March 11 market meltdown.