A massive sell-off in cryptocurrencies wiped more than $200 billion of wealth from the market in just 24 hours, according to estimates from price-tracking website CoinMarketCap.
The broad plunge in the crypto complex, driven by the collapse of the TerraUSD stablecoin, hit major tokens hard. Bitcoin plunged by as much as 10 percent in the last day to its lowest level since December 2020, while Ethereum dropped as much as 16 percent.
The carnage showed signs of spreading further Thursday as crypto-related stocks in Asia also cratered. Hong Kong-listed fintech firm BC Technology Group Ltd. closed down 6.7 percent. Japan’s Monex Group Inc., which owns the TradeStation and Coincheck marketplaces, ended the day down 10 percent.
As central banks across the world move to aggressively tighten monetary policy to fight inflation, digital tokens have faced selling pressure amid a broader flight from risk assets. S&P 500 futures lost 0.8 percent Thursday, tracking losses in the benchmark MSCI Asia Pacific Index.
Crypto exchanges in the U.S. 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 U.S.-focused business, by comparison, experienced even steeper declines than Coinbase’s.
Investors in the crypto space are no stranger to wild swings in the market. Still, the recent downturn carries a big hurt.
Billionaire crypto fortunes that swelled over the last two years are disappearing after a selloff that began with tech stocks spilled over into digital money. Bitcoin, the most popular cryptocurrency, and Ether have both fallen more than 50 percent 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.
Michael Novogratz, the CEO of crypto merchant bank Galaxy Digital, has seen his fortune plummet to $2.5 billion, from $8.5 billion 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.
Coinbase Global Inc. founder Brian Armstrong had a personal fortune of $13.7 billion as recently as November and about $8 billion at the end of March. That’s now just $2.2 billion, according to the Bloomberg Billionaires Index, after a selloff in digital currencies triggered a precipitous decline in the market value of Coinbase, the largest U.S. cryptocurrency exchange.
The company’s shares have tumbled 84 percent since their first day of trading in April 2021, closing Wednesday at $53.72 after Coinbase 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 take to Twitter to defend the company. There is “no risk of bankruptcy” even amid a “black swan” event and users’ funds are safe, said Armstrong, the firm’s chief executive officer.
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 $96 billion, one of the world’s largest. By Wednesday that had shrunk to $11.6 billion, using the average enterprise value to sales multiples of Coinbase and Canadian crypto firm Voyager Digital as a basis for the calculations.
Tyler and Cameron Winklevoss, co-founders of rival crypto exchange Gemini, have each lost about $2.2 billion — or roughly 40 percent — 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 $11.3 billion.
Armstrong isn’t the only Coinbase billionaire losing money. Co-founder Fred Ehrsam, a former Goldman Sachs Group Inc. trader, is currently worth $1.1 billion, down more than 60 percent this year.
Armstrong owns 16 percent of Coinbase and controls 59.5 percent of its voting shares, according to the company’s 2022 proxy statement, while Ehrsam has a 4.5 percent stake and controls 26 percent of its voting stock.