The blow-up of the crypto lending crisis this year sent shockwaves across the sector. That hasn’t deterred Fairfax County Retirement Systems’ attempt to plow deeper into the space. Fairfax County’s pension fund, worth $6.8 billion, received approval to pour in investments of $70 million across two crypto yield farming funds.
The development comes a month after two retirement systems – Fairfax County Employees’ Retirement System and the Fairfax County Police Officers Retirement System – announced investing a whopping $35 million in Parataxis Capital’s digital yield fund and VanEck’s new finance income fund.
Tapping Yield Farming Market
The catastrophic events in the last couple of months pulled down the valuation of crypto-assets by more than 50%. However, Katherine Molnar, a chief investment officer of the Fairfax County Police Officers Retirement System, revealed that the fund’s original investments in the market are up by 350%. The exec also said that “things will bounce back, and stronger technologies will probably survive.”
While speaking to FT, Molnar was quoted saying,
“Some of the yields that you’re able to achieve in a yield farming strategy are really attractive because some of the people have stepped back from that space. For those that are still willing to provide liquidity, decent profit seekers, they’re actually able to earn more attractive yields at the moment.”
The administrative region’s tryst with the digital asset space can be traced to three years ago when Virginia’s Police Department invested a portion of its pension fund in Bitcoin as well as blockchain technology. Its Director Jeff Weiler has been unperturbed by the intense market volatility and instead asserted that all investments come with certain risks while adding that dealing with crypto could bring substantial earnings.
Fall of Crypto Lending Platforms
The crypto lending space started unraveling after the collapse of Terra ecosystem’s algorithmic stablecoin, UST, as well as its sister token Luna (now Luna Classic). It was this incident that essentially accelerated the onset of a “crypto winter,” subsequently sparking an industry-wide sell-off followed by bank run-style series of withdrawals from platforms.
The multibillion-dollar hedge fund Three Arrows Capital was the first to succumb as it dragged down many investors. Soon after, Voyager Digital declared bankruptcy, leaving clients unable to recover any investments stored on the platform. Celsius is yet another crypto lender that is currently in bankruptcy proceedings.