Coronavirus Scare? Crypto Hedge Fund Closes due to ‘Unstable Environment’

crypto hedge fund closes

Reportedly, Crypto Hedge Fund, Adaptive Capital led by leading on-chain analysts, David Puell, Willy Woo, and Murad Mahmudav is closing business. In the letter to their investors, the fund managers note,

“We are convinced that the risks of continuing operations in such an unstable environment outweigh the potential benefits.”

They also reported a loss of nearly 50% due to the crash, and their subsequent inability to respond due to ‘infrastructural inefficiencies.’ Apart from that it also seems to point at the Coronavirus crisis, the world seems to be facing at large.

The number of affected people has now risen to 276,104 with over 11,400 casualties. Moreover, hopes of early eradication or a cure is also highly uncertain.

Recently, Willy Woo had noted on how the Coronavirus is turning out to be a ‘black swan’ event for the entire world. Hence, volatility and uncertainty is huge at the moment.

BitMEX Breakdown due to Overload

The other leading reasons of the close down have been identified as the BitMEX’s performance on the day of the crash. It inadvertently closed down for 45-minutes, during which the price on other exchanges soared to $5600 from $3800 in less than an hour.

BitMEX responds to the 45-minute shut-down by citing technical difficulties as the reason. Recently, many economists have been content with the way Bitcoin has been functioning as a free-market asset. Moreover, the traditional markets also have various ‘fail-safe’ levels, during which they halt trading.

While the pause on crypto exchanges was apparently caused to inability, traditional markets willingly shut-down the market, as they hit circuit break levels of 7%, 13%, and 20%.

Some analysts believe that circuit breakers are disruptive and keep the market artificially volatile by causing orders to build at the limit level and decreasing liquidity.

traditional market circuit breaker
Circuit Breaker Rules for NYSE (Source)

Difference in Price of BitMEX vs. Exchanges

Nevertheless, apart from the halting period there were other notable inefficiencies, in the difference in price. As reported on Coingape, on the day of the dip due to Coronavirus, there was a huge difference between the price on BitMEX and other crypto exchanges.

Notice, how how the XBT/USD index on Kraken reversed from lows at $3892 t0 $4474, while the price at BitMEX stalled around $3,600 as the exchanges shut-down. The discrepancy in price follows in the next few hours as well.

xbtusd difference
XBT/USD 15-min Chart on on BitMEX and Kraken (TradingView)

Bad for Bitcoin?

Prominent crypto trader and founder of whalecalls.io, notes,

you wanted capitulation to mark the bottom. a loud crypto fund is closing. ta da!

The shutdown of a fund by leading on-chain analysts and pioneers in the space, indeed marks a dent in the credibility of the crypto derivatives market.

However, does this mean a bad news for Bitcoin price? Probably Not.

willy woo signals
Bitcoin Profitability for buyers around $5K
Willy Woo, one of the leading partners in the firm recently tweeted on the recovery signals he has been witnessing the markets. The price of Bitcoin was about $5000 at the time. Apart from other positives, as a long-term hodler, he tweeted,
Nobody went broke buying BTC at these levels of on-chain RSI. (If you are in it for the long game)
How do you think the Coronavirus scene in going to be in the next few weeks? Please share your views with us.