Top university's crypto trading loses 6 billion? Data analysis unravels the University of Chicago's financial mystery

Recently, there has been an interesting discussion stemming from a scholar mentioning in an interview that the University of Chicago’s reduction in liberal arts funding might be related to the school following certain Nobel laureates’ advice to invest in ![]$BTC https://img-cdn.gateio.im/webp-social/moments-9b42b4815d-f3b572aa28-8b7abd-e2c905.webp$ETH cryptocurrencies, which resulted in losses of over $6 billion.

This figure sounds alarming, but we need to look at the facts first. The university’s official response at the end of last year explicitly denied the claim of losses due to cryptocurrency investments, stating that the scale of such investments was small but had grown more than twice over the past five years.

Intuitively, a $6 billion loss seems unlikely. The university’s endowment fund has fluctuated around $10 billion over the past five years. Unless they were wildly betting more than 60% of their assets on ![]https://img-cdn.gateio.im/social/moments-9b42b4815d-f3b572aa28-8b7abd-e2c905 cryptocurrencies, which would clearly violate prudent investment principles.

So, how much did they actually lose? Multiple sources cited by media outlets indicate that around 2021, the University of Chicago lost tens of millions of dollars due to ![]https://img-cdn.gateio.im/social/moments-9b42b4815d-f3b572aa28-8b7abd-e2c905 cryptocurrency investments. This magnitude seems more reasonable.

The school’s financial reports provide some clues. The FY2022 report shows that as of June 2021, the fair value of their ![]https://img-cdn.gateio.im/social/moments-9b42b4815d-f3b572aa28-8b7abd-e2c905 cryptocurrency holdings was about $64 million, which dropped to approximately $45 million a year later, a difference of about $19 million. After that, the report no longer disclosed this separately, with officials stating they remain cautious in their investments.

Notably, the same FY2022 report revealed that the university’s total endowment fund suffered investment losses of about $1.5 billion. The situation improved in the following two years, turning profitable. However, we cannot precisely determine how much of the gains or losses came from ![]https://img-cdn.gateio.im/social/moments-9b42b4815d-f3b572aa28-8b7abd-e2c905 cryptocurrencies.

Some analysts point out that the university’s endowment fund’s annualized return from 2013 to 2023 was 7.48%, lower than the 12.8% of the stock market during the same period, and also below the Ivy League average of 10.8%. If their performance had only matched the market, the fund would be $6.45 billion larger; if they matched peer averages, it would be $3.69 billion more.

Beyond investment performance, there are more significant structural reasons for the funding cuts: aggressive expansion and high debt levels. As of last June, the university’s total debt was about $9.2 billion, nearly 90% of the endowment size. Just interest payments this fiscal year exceeded $200 million.

These debts stem from large-scale infrastructure projects since the early 2000s aimed at boosting competitiveness, including labs, libraries, and dormitories. But expansion brought ongoing operational costs, and the school did not plan long-term funding support well. Some internal faculty sharply pointed out that the tuition paid by students’ parents might be more about covering the school’s debt rather than their children’s education.

Meanwhile, from 2006 to 2022, the president’s base salary increased by 285%. Even in years of asset sales, layoffs, and hiring freezes, executive pay continued to rise, fueling internal discontent.

To address these difficulties, besides cutting costs, the school also needs to increase revenue. A common approach among American universities is to expand undergraduate enrollment to boost tuition income. The University of Chicago is likely to follow this path, although its public justification will probably sound more noble.

So, returning to the original question: the so-called “60 billion loss from crypto trading” is more like an exaggerated rumor. The real financial pressure stems from long-term debt-driven aggressive expansion, relatively mediocre investment returns, and possible management decision issues. The ![]https://img-cdn.gateio.im/social/moments-9b42b4815d-f3b572aa28-8b7abd-e2c905 cryptocurrency investment loss may just be a small splash in the stormy sea of this large ship.

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