The founder and managing partner of Morgan Creek Digital Assets, Anthony Pompliano, also known as Pomp, said in his blog that cryptocurrency funds will start to close, and their managers will return money to investors. He also gave a disappointing prognosis for ICO projects.
Many crypto funds and ICO projects are about to race to shut down or declare bankruptcy.
— Pomp 🌪 (@APompliano) November 18, 2018
They don’t even realize what is happening. I’m elaborating on this and more in tomorrow morning’s installment of Off The Chain email.
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He recalls that for most funds, the end of the previous investment period is December 2017, that is, the moment the cryptocurrency market reaches its peak. Since then, the net asset value of these funds has decreased by 50-80%. This means that investment managers will not be able to assign themselves the usual 20% commission on income at the end of 2018, because they could not increase capital during the outgoing investment period.
“Additionally, the fund managers won’t receive another performance fee until they are able to 2-4X increase the net asset value of the fund from current levels. It wouldn’t surprise me if fund managers won’t be able to achieve those levels of profits until at least 2020, if not further out,” considers Anthony Pompliano.
The founder of Morgan Creek Digital Assets believes that many market players will close their funds and wait a year or more to return to the cryptocurrency investment market with a new product. The minority will try to survive a long bear market. He is confident that the managers have not yet closed their funds due to the lack of experience, at the moment they still do not realize how bad things are with them.
The expert also adds that big problems await many ICO startups. Pompliano explains that the decision of the U.S. Securities and Exchange Commission (SEC) regarding ICO-startups Paragon and Airfox indicates that most of the tokens issued within crowd sails will be recognized as unregistered securities. This means that the projects will be fined, and investors will be able to demand the investment back.
Almost all companies attracted funding in cryptocurrencies, yet they will be required to return funds in dollars. If we take into account the current collapse of the digital assets market, it becomes clear that ICO startups simply will not be able to return investments in fiat equivalent. So, the projects will be declared bankrupt, concludes Anthony Pompliano.
If ICO-projects go bankrupt, the investment in crypto funds will start to approach zero sharply, says Pomp. “The compounding effect of the high water mark issues and deepening losses should be quite discouraging for fund managers and limited partners alike. As both ICOs and funds begin to shut down, it is easy to see a future feeling of panic and desperation spreading across parts of the market,” he adds.
However, Pompliano comes to the conclusion that the situation is the darkest before the dawn. And the current state should be perceived as normal. The bear market is throwing tourists out of the game, leaving only true entrepreneurs who can create sustainable value, the expert is sure.
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