It’s been a long few weeks since the crypto crowd was partying in Miami.
Coinbase Global founder Brian Armstrong had a personal fortune of $13.7bn (about R222bn) as recently as November and about $8bn (about R130bn) at the end of March. That’s now just $2.3bn (about R37bn), after a sell-off in digital currencies from bitcoin to ether triggered a precipitous decline in the market value of Coinbase, the largest US cryptocurrency exchange.
By Wednesday, the firm’s shares had tumbled 78% since their April 2021 initial public offering after the company warned that trading volume and monthly transacting users were expected to be lower in the second quarter than in the first.
It’s raised questions about Coinbase’s ability to withstand the sharp decline in crypto prices, forcing Armstrong to defend the company on Twitter. There is “no risk of bankruptcy” even amid a “black swan” event and users’ funds are safe, said the firm’s CEO.
Then there’s Michael Novogratz. The CEO of crypto merchant bank Galaxy Digital has seen his fortune plummet to $2.9bn (about R47bn) from $8.5bn (about R138bn) in early November. He’s been a champion of TerraUSD, the algorithmic stablecoin that’s now at risk of a complete collapse amid a breakdown in the price of a crypto token in the same ecosystem, luna.
“I’m probably the only guy in the world that’s got both a bitcoin tattoo and a luna tattoo,” Novogratz said at the Bitcoin 2022 conference in Miami on April 6.
Billionaire crypto fortunes that swelled over the past two years are disappearing after a sell-off that began with tech stocks spilt over into digital money. Bitcoin, the most popular cryptocurrency, and ether have fallen more than 50% since their record highs late last year.
While almost all crypto holders have suffered wealth declines, some of the biggest and most visible losses are concentrated among founders of exchanges, where traders buy and sell digital currencies.
At least on paper, Changpeng Zhao, the CEO of closely held Binance, has lost an even larger fortune than Armstrong or Novogratz. He debuted on the Bloomberg wealth index in January with a net worth of $96bn (about R1.5-trillion), one of the world’s largest. By Wednesday that had shrunk to $16bn (about R260bn).
Crypto exchanges in the US appear to be suffering more of a downturn than their global competitors. Trading volumes at Coinbase have steadily fallen since the beginning of the year, while more internationally focused Binance saw an uptick in volume last month. Binance’s US-focused business, by comparison, experienced even steeper declines than Coinbase’s.
Tyler and Cameron Winklevoss, co-founders of rival crypto exchange Gemini, have each lost about $2.1bn (about R34bn) — about 40% — of their wealth this year. The fortune of Sam Bankman-Fried, CEO of crypto exchange FTX, has fallen by half since the end of March to about $13bn (about R211bn).
Armstrong isn’t the only Coinbase billionaire losing money. Co-founder Fred Ehrsam, a former Goldman Sachs trader, is now worth $1.3bn (about R21bn), down more than 60% this year.
Armstrong owns 16% of Coinbase and controls 59.5% of its voting shares, according to the company’s 2022 proxy statement, while Ehrsam has a 4.5% stake and controls 26% of its voting stock.
Coinbase’s bonds have also plunged, recently trading in line with some of the riskiest junk-rated notes.
More stories like this are available on bloomberg.com
— Bloomberg
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