Now not like many diverse sizable crypto investors, Olaf Carlson-Wee says his enterprise capital agency Polychain Capital managed to emerge reasonably unscathed from the total sizable blow-u.s.of 2022, including those of Sam Bankman-Fried’s FTX and Alameda, and Terra Luna/UST.

That’s because Carlson-Wee, who’s been investing in crypto since 2011 and was the first worker at Coinbase, adheres to strict probability controls provided that crypto is inherently a “harmful and speculative asset class.”

“Thanks to that, I of route like to own extraordinarily tight probability controls all around the things we are in a position to manipulate,” Carlson-Wee told the Unchained podcast. “And I don’t desire to ever salvage overconfident or add on probability that’s like this pointless probability. We already own ample market person adoption, hardcore abilities probability, [and] security risks with these protocols.”

Chief among those capacity added risks is having counterparty probability.

Read extra: What Is Counterparty Possibility in Crypto? A Beginner’s Manual

“I’ve ceaselessly been extraordinarily paranoid from the initiating of Polychain about counterparty probability,” Wee eminent. “And what I mean by that’s where are the cash? Are they sitting on exchanges? Let’s exclaim we attain lending agreements. Who is that person we’re lending to? If it’s through one amongst these lending desks, who’re they lending the cash to and where are those cash within the extinguish residing?”

No Lending at Scale, Nor Leverage

Carlson-Wee outlined that Polychain has had plenty of investors encourage the corporate to lend out its crypto holdings for extra yield through the years, but he nearly ceaselessly says no, announcing the probability-reward ratio is rarely any longer worth it.

“We don’t essentially engage in lending at scale at all,” Carlson-Wee acknowledged. “We honest accurate own never performed it. And it’s because it honest accurate takes on this extra counterparty probability to salvage a miniature bit bit of return, but you’re form of lacking the sizable exclaim, which is that if we play our cards accurate, the return we’re going to salvage is amazingly, exceptional and let’s no longer take on this extra probability.”

Carlson-Wee also acknowledged he also essentially doesn’t expend leverage on his investments.

“I don’t strive and time the market and movement up and down my exposure and lever up,” Carlson-Wee acknowledged. “You perceive, 50% drops in crypto are no longer dusky swan events. It occurs every two years. So if you occur to’re on 2x leverage, you’re honest accurate going to salvage blown out every a quantity of yr in crypto. It’s no longer a cheap solution to alternate on this market and continue to exist for the prolonged bustle and manufacture returns sustainably.”

FTX and Terra Luna/UST

Carlson-Wee acknowledged that his aversion to added probability is what allowed Polychain to steer clear of getting sunk by the sizable crypto blow-u.s.of 2022.

With appreciate to FTX and Alameda, Carlson-Wee eminent that he “got pitched by Sam many, time and again and handed each time because there was such an evident and irreconcilable war of passion between FTX and Alameda. And that grew to become out to be the thing that destroyed the total thing.”

Carlson-Wee extra outlined that the total cash FTX and Alameda launched had a really low float throughout which there was a mismatch between stamp and liquidity. “So it looks as if it’s worth a hundred billion bucks, but you actually strive and sell and salvage out and you salvage nothing,” Carlson-Wee acknowledged.

Read extra: FTX Property Accountable for $1B of GBTC Outflows: Document

As for Terra Luna and UST, Carlson-Wee acknowledged he known early on a system that in some sense collateralized itself was no longer sustainable. “We had had this experiment play out for years,” he acknowledged, noting that Polychain had invested in Luna early in its existence when it was a orderly contract play, but then exited as soon as it pivoted to turning into an algorithmic stablecoin system.

Read extra: Terraform Labs, Enact Kwon Sold Unregistered Securities, U.S. Favor Principles

In the tip, Carlson-Wee acknowledged Polychain was in a field to steer clear of the worst of 2022’s blow-ups “80% due to the staunch probability administration philosophy that I had in field for years and years, and 20% honest accurate fortune. There’s ceaselessly honest accurate fortune in these items.”

And overall, Carlson-Wee feels very certain about how his company managed the total turmoil.

“I occupy of route very, exceptional in regards to the plot in which that Polychain navigated 2022,” Carlson-Wee acknowledged. “Obviously we got taken down with the macro plan down, however the total particular landmines, we averted stepping on.”