In this article, we discuss the 10 biggest losers in the cryptocurrency crash. If you want to skip our detailed analysis of the cryptocurrency market and its current situation, go directly to Crypto Crash: 5 Biggest Losers.
Cryptocurrencies have turned many people into millionaires, or even billionaires over the last several years. Bitcoin, the most famous cryptocurrency in the world, debuted at $0.0008 per token in July 2010. Fast forward to November 2021, it reached an all-time high of $69,000. This unimaginable jump in wealth has attracted many retail and institutional investors over the years, with the crypto hype bursting into the mainstream culture and spurring a range of crypto-related platforms/exchanges. The industry stood at roughly $3 trillion at the end of 2021, and it remained a popular place for Americans to park their money. According to a Pew Research Center survey, 16% of adults in the United States said that they had invested in, traded or made use of a cryptocurrency. In contrast, Pew had asked respondents in a survey about Bitcoin in 2015, and only 1% said they had ever used, traded or collected it.
As it stands, Bitcoin has shed almost $27,000 in value since 2022 started, a loss of 56.44%, currently hovering around the $20,000 mark. Major platforms have laid off staff, paused withdrawals, and lost tremendous portions of their market caps in the last few months. This downward spiral was initiated with Terra Platform’s TerraUSD cryptocurrency, which was pegged to the US dollar, losing its $1 value, triggering a slide that also caused its sister currency Luna to crash. The larger market is already under immense pressure, and seems likely heading towards a recession. Interest rates have seen large hikes in a bid to control inflation which is near 40-year highs. This negative market sentiment made its way into the crypto world, and as with all risky assets, the market started bailing. The crypto market has seen its valuation chopped by $2 trillion, currently standing at around $1 trillion.
But some people are bigger believers in the potential of cryptocurrencies than others. CEO of Binance Changpeng “CZ” Zhao, the man running the world’s largest cryptocurrency platform, has played down this crash as just another in a series of downturns which eventually sees the prices of cryptocurrencies stay permanently higher. In a tweet, he assessed that after a period of sustained and impressive growth, Bitcoin fell below $20 in 2011, below $200 in 2015, below $2,000 in 2017, and has similarly dropped below $20,000 in 2022. In an interview to Fortune, he also talked about his company’s decision to expand its workforce at a time competitors were making job cuts, saying that bull markets tend to care about prices, while bear markets bring out value-conscious workers who continue building the industry.
Gemini, a leading crypto trading platform, recently reduced its workforce owing to the current market situation. The Winklevoss brothers running the firm, Cameron and Tyler, shared their views on what’s happening in the crypto world. The following paragraph is detailed and succinct enough to mention as it is:
“The crypto revolution is well underway and its impact will continue to be profound. But its trajectory has been anything but gradual or predictable. Its path can best be described as punctuated equilibrium — periods of equilibrium or stasis that are punctuated by dramatic moments of hypergrowth, followed by sharp contractions that settle down to a new equilibrium that is higher than the one before. This is where we are now, in the contraction phase that is settling into a period of stasis — what our industry refers to as ‘crypto winter.’ This has all been further compounded by the current macroeconomic and geopolitical turmoil.”
Amid the larger market sell-off and the decline of cryptocurrencies in particular, companies with sizeable investments in digital assets including cryptocurrencies are also facing negative investor sentiment. These include names such as Block, Inc. (NYSE:SQ), Paypal Holdings, Inc. (NASDAQ:PYPL), Visa Inc. (NYSE:V), and Tesla, Inc. (NASDAQ:TSLA), which bought $1.5 billion worth of Bitcoin in 2021 and accepts Dogecoin payments. Let’s now take a look at the 10 biggest losers amid the ongoing cryptocurrency crash.
Crypto Crash: 10 Biggest Losers
10. Coinbase Global, Inc. (NASDAQ:COIN)
Coinbase Global, Inc. (NASDAQ:COIN) is one of the world’s largest crypto-trading platforms. It recently announced slashing its workforce by 18%, around 1,100 jobs, as part of corporate restructuring in response to plummeting crypto prices and a weak macro outlook in general. The company expects this restructuring plan to be mostly completed in the second quarter, and cost in the range of $40-45 million due to severance packages and related employment termination benefits. As of June 17, the company shares have suffered a massive decline of 79.6% in the year so far.
Coinbase Global, Inc. (NASDAQ:COIN) reported that its active monthly users (AMU) saw a decline of 19% in the first quarter. The company generates a majority of its revenue base on the value of the cryptocurrency token prices and much of the rest based on sentiment, according to JPMorgan analyst Kenneth Worthington, who downgraded the company shares to ‘Neutral’ from ‘Overweight’, with a significantly reduced price target of $68, down from $171. Although he continues to be a believer in cryptocurrency markets and blockchain technology, the analyst sees more downside potential for Coinbase Global, Inc. (NASDAQ:COIN) if crypto markets do not stabilize and management does not announce more measures to reduce its cost base.
For the first quarter, Coinbase Global, Inc. (NASDAQ:COIN) posted EPS which was recorded below estimates by $2.17, while quarterly revenue also underperformed market estimates by approximately $310 million.
Hedge fund sentiment was also negative on Coinbase Global, Inc. (NASDAQ:COIN). At the close of Q1 2022, 46 hedge funds owned positions in the company, as compared to 57 hedge funds a quarter ago. Long-time crypto bull Catherine Wood was the largest shareholder of Coinbase Global, Inc. (NASDAQ:COIN) in the first quarter, with her ARK Investment Management holding a $1.32 billion stake in the firm.
Longleaf Partners Fund, an investment firm, talked about Coinbase Global, Inc. (NASDAQ:COIN) in its Q4 2021 investor letter. Here’s what the fund said:
“We also have seen plenty of IPO/SPAC craziness showing both that private players need public markets more than they admit and that there is more volatility embedded in these newer companies than a private quarterly mark might admit. As for how efficient both the private and public markets are, we would encourage you to really delve into some of those multi-hundred-page S1s for many of the newest public companies to see the huge gap between the last valuation at which the company was funded and/or granted shares to its executives and the often much higher price at which the company went public – Coinbase is a prime example.”
As crypto platforms like Coinbase Global, Inc. (NASDAQ:COIN) undergo significant losses, other companies with interests in digital financial technology are also facing downward slides, such as Block, Inc. (NYSE:SQ), Paypal Holdings, Inc. (NASDAQ:PYPL), Visa Inc. (NYSE:V), and Tesla, Inc. (NASDAQ:TSLA).
BlockFi is a crypto lending platform, which offers users interest payments in return for their cryptocurrency deposits. It serves more than 650,000 clients around the globe through its products in the Earn, Invest, Borrow, and Pay categories.
Marred by the brutal sell-off in the crypto industry, the company on June 13 announced that it was letting go of 20% of its staff. Company CEO and co-founder Zac Prince said in a series of tweets that the the firm was suffering due to a “dramatic shift in macroeconomic conditions,” which negatively impacted its growth prospects.
Apart from job cuts, BlockFi is also slowing its headcount growth, reducing marketing budgets, cutting executive compensation and eliminating non-critical vendors. Still, the company management insists that they are “here for the long haul.” CEO Prince informed users that they will not experience any changes to the expected quality of service, and that all platforms/products will continue to operate as per routine.
BlockFi is backed by venture capitalist Peter Theil, and has enjoyed phenomenal growth in recent years due to its low borrowing costs and the continued adoption of cryptocurrencies around the world. Prior to the ongoing market crash, the company had expanded from around 150 employees at the end of 2020 to upwards of 850 employees.
Crypto.com is a crypto exchange and trading platform which enables more than 50 million users around the globe to trade approximately 250 cryptocurrencies. It also offers reward payments on crypto deposits, and a crypto wallet to hold digital currencies. The firm was founded in Singapore in 2016, and has grown to become one of the most dominant names in the space, with a workforce of more than 4,000.
On June 11, CEO Kris Marszalek announced on Twitter that Crypto.com was letting go of 5% of its corporate workforce, around 260 personnel. Many, including rival firm Binance’s CEO Changpeng Zhao, have taunted the firm for this decision, especially in light of its recent extravagant spending on sponsorship deals, which includes acquiring the naming rights for the Staples Center in Los Angeles, and renaming it Crypto.com Arena in a 20-year deal worth $700 million. Crypto.com has also partnered with French football club Paris Saint Germain (PSG), and Matt Damon’s Water.org, who now acts as Crypto.com’s brand ambassador as well.
Despite the poor market sentiment towards cryptocurrencies driving this decline, Crypto.com CEO Marszalek noted that the market will eventually circle out of this downturn, and the firm will then “be ready to drive and capture the next wave of growth for cryptocurrency adoption.”
7. Terra Platforms
Outspoken South Korean entrepreneur Do Kwon co-founded Terra Platforms in 2018, launching a blockchain-powered platform to enable a more efficient payment system. He also launched TerraUSD, which was said to be price-stable cryptocurrency pegged to the US dollar through an algorithm, therefore always priced at $1. Traders use stable-coins as intermediaries when switching between different cryptocurrencies, instead of having to switch to US dollars every time.
A large part of the ongoing crypto meltdown can be attributed to the Terra USD losing its dollar-value in May, falling as low as 69 cents. This caused a lot of investors to sell their holdings and become nervous about crypto as a whole. TerraUSD went into a death spiral, and currently trades around $0.00635. Stable-coins are usually tied to the dollar’s price with backings in the form of cash, Treasury notes, and other dollar debt easily sold off in times of need. Instead, TerraUSD used financial engineering and algorithms to retain its $1 value. This made the currency more susceptible to market volatility, and the third largest stable-coin in the world with an $18 billion value has now destroyed the savings of millions of retail investors around the world. Do Kwon deployed a $3 billion Bitcoin reserve to reinstate the dollar value of the TerraUSD, but to no avail.
Terra Platforms also operated Luna, a ‘sister’ cryptocurrency of the TerraUSD, which maintained its peg to the dollar by burning/buying Luna coins to adjust supply. Luna was trading around $115 in April, and the crash of TerraUSD led to its sister cryptocurrency losing billions in value as well, currently trading next to a zero value, at $0.000055.
Millions of investors have lost their life savings with the $40 billion fall of the Terra platform, which was only a month ago considered one of the top names in the crypto world, boasting partnerships with South Korean ticketing firm Ticketmonster and travel service Yanolja. Kwon also enjoyed backing from many institutional investors over the last years, many of whom cashed out before the crash, leaving the average retail investor to take the losses.
6. Celsius Network
Celsius Network operates as a cryptocurrency bank, where users can deposit their cryptocurrencies to receive returns as high as 18%. It also provides low-cost loans, accessible to its members through a fee-less model. The company boasts more than 1 million customers, and was managing more than $26 billion in assets as of October 2021, the first in the crypto space to cross the $20 billion figure.
This news hastened the downward slide of cryptocurrencies, with Bitcoin losing 15%, Ether 17% and Celsius’ Cel token slumping more than 38% the same day. Since the start of the year, the company’s Cel token, which it encourages users to buy, has lost nearly 88% in value, falling from $4.394 to $0.545 as of June 18.
Many critics had lambasted Celsius’ absurdly high yield returns and a general lack of regulatory oversight and consumer protections for the crypto industry as a whole. Several US states in September 2021 moved against Celsius Network, for allegedly offering residents unregistered securities. New Jersey had ordered the firm to stop offering residents some of its financial products.
As cryptocurrencies go in a free fall, companies with huge investments in digital assets like Block, Inc. (NYSE:SQ), Paypal Holdings, Inc. (NASDAQ:PYPL), Visa Inc. (NYSE:V), and Tesla, Inc. (NASDAQ:TSLA) are also losing ground.
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