Crypto Firms Quake as Prices Fall

San Francisco — No one wanted to miss a crypto enthusiast.

Over the last two years, the prices of Bitcoin and other cryptocurrencies have skyrocketed, resulting in a surge in cryptocurrency start-ups. Companies selling digital coins to investors are flooding the air with TV commercials, and new lending operations are coin-based, offering ultra-high interest rates on cryptocurrency deposits and allowing investors to trade digital assets. Exchanges like, continued to hire Spree.

The world’s industry, worth hundreds of billions of dollars, has risen virtually overnight. Now it’s crashing.

After a few weeks of cryptocurrency prices plummeting, Coinbase said on Tuesday that it has cut 18% of its employees after being fired by other crypto companies such as Gemini, BlockFi and Crypto.com. Well-known start-ups like Terraform Labs have wiped out and destroyed years of investment. On Sunday, the experimental crypto bank, Celsius, suddenly stopped withdrawing.

The retreat of the crypto ecosystem shows the instability of structures built around these dangerous and unregulated digital assets.The total value of the cryptocurrency market is Approximately 65% ​​reduction Analysts expect to sell out after the fall. Cryptocurrency company stocks have skyrocketed, retailers have fled, and industry executives have predicted a long-term slump that could put more companies at risk.

Lee Reiners, a former Federal Reserve Board teacher at Duke University Law School, said: “The music has stopped.”

Cryptocurrencies are digital coins that are exchanged using a network of computers that validate transactions, rather than centralized entities such as banks. For years, they have been sold as hedges against inflation caused by central banks flooding their economies with money. Bitcoin, the most valuable cryptocurrency, has built-in restrictions on its supply.

But now, with stocks plunging, interest rates soaring, and inflation soaring, cryptocurrency prices are also collapsing, indicating that they are tied to the market as a whole. And as people withdraw from crypto investment, spills expose many of the volatile foundations of the industry’s most popular companies.

More than 62 cryptocurrency startups are currently worth more than $ 1 billion, according to CB Insights, a company that tracks private funding. Last year, the industry received over $ 25 billion in venture funding in about 1,700 transactions, according to a study by The Block. OpenSea, the largest market for unique digital images known as non-fungible tokens, has reached an astonishing $ 13 billion valuation. In addition, Wall Street banks such as JP Morgan Chase, which previously avoided crypto assets, and Fortune 500 companies such as PayPal have begun offering cryptocurrencies.

Many of these companies are ready to withstand the decline in cryptocurrency prices. However, after years of overgrowth, reductions may continue as the strategy is adjusted. The most vulnerable could be a startup that launched its own cryptocurrency as prices plummeted across the board.

Some industry experts have long stated that the vibrant growth of the last two years will not last forever compared to the dot-com boom of the late 1990s. At the time, dozens of dot-com companies were listed in hysteria over the early promises of the Internet, but few were profitable. When self-confidence was lost in the early 2000s, many of dotcom went bankrupt, leaving only the largest of eBay, Amazon, and Yahoo.

This time, investors predict that there will be more survivors. Mike Jones, an investor in the venture company Science Inc, said:

There was a warning sign that some crypto companies were not sustainable. Skeptics point out that many of the most popular companies offer products backed by high-risk financial engineering.

For example, Terraform Labs offered TerraUSD, a so-called stablecoin with a fixed value linked to the US dollar.The coin was touted by founder Dokwon, who raised over $ 200 million from majors. Investment company Even if critics warn that the project is unstable, Lightspeed Venture Partners and Galaxy Digital.

The price of the coin was algorithmically linked to its sister cryptocurrency, Luna. TerraUSD fell at the same time when Luna’s price plummeted in May. This is a “death spiral” that has destabilized the wider market and caused some investors to collapse.

This week, Celsius’ announcement that the withdrawal was frozen had a similar effect. Celsius aggressively marketed bank-like lending services to his clients, promising yields as high as 18% if they deposited cryptocurrencies with the company.

For months, critics wondered if Celsius could maintain such a high yield without jeopardizing depositors’ money through risky investments.Company Scrutinized From regulatory agencies in several states. In the end, the fall in crypto prices seemed to put the company under unbearable pressure.

Celsius announced on Sunday that it has frozen its withdrawal “due to extreme market conditions” as Bitcoin prices fall. The company did not respond to requests for comment.

Market instability also caused a crisis at Coinbase, the largest cryptocurrency exchange in the United States. Between the end of 2021 and the end of March, the price of cryptocurrencies fell, causing Coinbase to lose 2.2 million active customers, or 19% of the total. In the first three months of this year, the company’s net sales were $ 1.2 billion, down 27% from the previous year. Since its release last year, stock prices have fallen 84%.

This month, Coinbase Cancel jobs and extend hiring freeze To fight the recession. On Tuesday, it announced that it would cut about 1,100 workers.

Brian Armstrong, Coinbase CEO, has informed employees about the layoffs. Memo The company said it was “growing too fast” as cryptocurrency products became popular Tuesday morning.

“It’s now clear to me that we overemployed,” he writes. A Coinbase spokesman declined to comment.

Ryan Coin, who is in charge of cryptocurrency companies and financial technology at Mizuho Group, said: “Now we are turning to profitable growth.”

Gemini, a cryptocurrency exchange led by billionaires Tyler and Cameron Winklevos, also announced this month that it will dismiss 10 percent of its workforce.and Memo Winklebos twins told staff that the industry had entered a “winter of cryptography.”

But they also showed optimism about the future of the industry. “The crypto revolution is on track and its impact remains serious,” they wrote in a memo. “But the trajectory was not gradual or predictable.”

Last year, Singapore-based exchange Crypto.com aired the now infamous television. Commercial Actor Matt Damon starred and encouraged investors to put money into the crypto market, proclaiming “luck is in favor of the brave.”Last week, CEO of Crypto.com publication He had fired 5% of his staff, or 260 people. On Monday, BlockFi, a crypto lending business, Said The staff was reduced by about 20%.

Gemini and BlockFi declined to comment. A Crypto.com spokesman said the company continues to focus on “investing resources in product and engineering capabilities to develop world-class products.”

Cryptocurrencies have long been volatile and tend to be a boom and bust cycle. In 2013, the Chinese ban on Bitcoin lowered its price. In 2017, the price of cryptocurrencies skyrocketed due to the surge in companies that create and sell their own tokens. It plunged after regulators cracked down on so-called early coin offerings.

These bubbles are built into the ecosystem, crypto enthusiasts said. They attract talented people to the industry and they continue to build valuable projects. Many of the loudest cheerleaders encourage investors to “buy a dip” or invest more when prices are low.

Jones, an investor at Science, said: “We all believe in fundamentals.”

Some companies also remain rebellious. In Game 5 of the NBA Finals on Monday night, Coinbase aired a commercial that hinted at a cycle of past booms and busts.

“The code is dead,” it declared. “Longevity code”.