The shock of the crypto lending crisis this year shook the entire sector. That hasn’t stopped Fairfax County Retirement Systems’ effort to dig deeper into the space. Fairfax County’s $6.8 billion pension fund has been approved to invest $70 million in two crypto yield farming funds.
The development comes a month after two retirement systems — the Fairfax County Employee Retirement System and the Fairfax County Police Officer Retirement System — announced investments of $35 million in Parataxis Capital’s Digital Yield Fund and VanEck’s New Finance Income Fund.
Harnessing the produce farming market
The catastrophic events in the past few months have caused the valuation of crypto-assets to drop by more than 50%. However, Catherine Molnar, a chief investment officer for the Fairfax County Police Officers Retirement System, revealed that the fund’s original investments in the market increased by 350%. The exec also said that “things will return, and stronger technologies will probably survive.”
Speaking to FT, Molnar was quoted as saying,
“Some of the gains that you are able to achieve in a yield farming strategy are really attractive because some people have retreated from that position. For those still willing to provide liquidity, good profit seekers , they are actually able to earn more attractive returns at this point in time.”
The administrative sector’s forays into the digital asset space can be traced back to three years ago when the Virginia Police Department invested a portion of its pension funds in bitcoin as well as blockchain technology. Its director Jeff Weiler has not been impressed by the intense market volatility and instead stated that all investments come with some risk, whereas dealing with crypto can yield substantial returns.
The collapse of the crypto lending platform
The crypto lending space began to unravel following the collapse of the Terra ecosystem’s algorithmic stablecoin, UST, as well as its sister token Luna (now Luna Classic). It was this event that essentially heralded the start of a “crypto winter”, subsequently fueling an industry-wide selloff, followed by a bank run-style series of withdrawals from the platform.
Multibillion-dollar hedge fund Three Arrows Capital was the first to succumb as it pulled many investors down. Shortly thereafter, Voyager Digital declared bankruptcy, leaving customers unable to recover any investments stored on the platform. Celsius is yet another crypto lender that is currently in bankruptcy proceedings.
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