Multicoin Capital, a crypto venture firm, has told investors that the collapse of FTX and the price drop across the industry has pushed the fund down 55 per cent this month and that worse is on the way before the market recovers.

Multicoin said there is a chance the firm will recover some of its funds from FTX, but because these assets are now wrapped up in bankruptcy proceedings, it expects them to be marked below zero, reports CNBC.

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It’s an abrupt reversal for Multicoin, which recently announced its third and largest fund, $430 million.

In a letter last week, the firm mentioned it was able to retrieve approximately one-quarter of its assets from FTX, but the money still stranded there represented 15.6 per cent of the fund’s assets, according to the report.

“We put entirely too much trust in our relationship with FTX. We had too many assets on FTX,” Multicoin managing partners Kyle Samani and Tushar Jain wrote in the letter.

Multicoin also said at the time that it had traded on three exchanges – FTX, Coinbase, and Binance.

Now, 100 per cent of its assets “aside from the capital stuck on FTX” are on Coinbase or in self-custody “multi-sigs,” which require multiple signers to control funds, the report added.

“At present, the fund has no assets exposed to any other counterparties. In the future, we anticipate some diversification of custodial exposure – with Coinbase expected to remain our primary custodian – and will resume trading with other counterparties as we continue to assess the present market fallout,” said Multicoin.

Moreover, Multicoin stated that it does not expect the cryptocurrency market to turn anytime soon because there will be more collapses as a result of the sudden failure of FTX and sister hedge fund Alameda Research, both of which were owned by Sam Bankman-Fried.

“We expect to see contagion fallout from FTX/Alameda over the next few weeks. Many trading firms will be wiped out and shut down, which will put pressure on liquidity and volume throughout the crypto ecosystem,” the letter said.

“As other companies with assets tied to FTX seek to raise emergency funds, we are looking to buy dislocated assets at attractive valuations,” Multicoin added.