'More Pain Ahead': Multicoin Says Crypto Market Won't Turn Around Anytime Soon

The FTX contagion seems to continue affecting the broader crypto market, with more trading firms to be "wiped out and shut down," crypto venture firm Multicoin Capital tells its investors in a detailed letter.

The firm, which reportedly has about $863 million in assets frozen on the FTX exchange, predicted more pain ahead and said further downfall is expected before the market bounces back.

"We expect to see contagion fallout from FTX/Alameda over the next few weeks," the crypto-focused asset management firm notified its investors via a letter seen by CNBC. "Many trading firms will be wiped out and shut down, which will put pressure on liquidity and volume throughout the crypto ecosystem. We have seen several announcements already on this front, but expect to see more."

Multicoin further said that the firm "had too many assets on FTX," and the collapse of the exchange has sunk the fund by 55% this month.

"We put entirely too much trust in our relationship with FTX," the letter, compiled by Multicoin managing executives Kyle Samani and Tushar Jain, read.

While the firm traded on three exchanges viz. Binance, FTX and Coinbase last week, it has now lost hope on asset recovery from the troubled FTX, especially after the Bahamas-based exchange filed for bankruptcy.

"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," Multicoin added.

The letter says Multicoin doesn't see the crypto market recovering in the near future. There have been more "sudden failures," following FTX's downfall, it added.

However, the firm noted that "FTX won't be the end of the crypto industry" and the company expects to see "green shoots next year."