Cryptocurrency Crash Widens Gap Between Rich Traders and Amateur Traders

ENGLEWOOD, Colorado. – The cryptocurrency market lay in ruins. But Tyler and Cameron Winklevoss were jamming.

billionaire twinsbest known for their supporting role in the creation of Facebook, circled and moved around the stage with their new cover bandMars Junction, at a concert venue outside of Denver last week, last stop at coast to coast tour. They sang hits like “Mr. Brightside” and Journey “Don’t Stop Believin'”. Tickets cost $25.

The Winklevosses were moonlighting as rockers just weeks after their $7 billion company Gemini, which offers a platform for buying and selling digital currencies, laid off 10 percent of its staff. Since the beginning of May, more than $700 billion has been destroyed. devastating collapse of cryptocurrencyplunging investors into financial ruin and forcing companies like Gemini to cut costs.

“Limitations are the mother of innovation, and tough times are a focus-enhancing feature,” say the 40-year-old Winklevosses. in a note layoffs this month.

Cryptocurrencies have long been seen as a means of expanding economic opportunities. Enthusiasts are promoting digital coins that are exchanged through networks of computers that validate transactions rather than through a centralized organization such as a bank as a means for people of all backgrounds to achieve transformational wealth outside of the traditional financial system.

But despite all these supposedly egalitarian principles, the collapse of crypto has exposed a gaping gap: as employees of crypto companies lose their jobs and ordinary investors suffer huge losses, top managers remain relatively unscathed.

No crypto investor has been able to completely avoid the economic downturn. But a small group of industry titans amassed a huge fortune when prices soared over the past two years, giving them an enviable safety cushion. Many of them bought Bitcoin, Ether and other virtual currencies years ago when prices were a fraction of their current value. Some fixed their profits early by selling some of their crypto assets. Others run publicly traded cryptocurrency companies and cash out their shares or invest in real estate.

On the contrary, many amateur traders have flooded the cryptocurrency market during the pandemic, when prices have already begun to rise. Some have invested their savings, leaving them vulnerable to a crash. thousands also went to work in a crypto companythinking that this is a ticket to new riches. Now many of them have seen their savings disappear or lose their jobs.

According to Todd Phillips, director of financial regulation and corporate governance for the Center for American Progress, a liberal think tank, the fallout from the cryptocurrency crash echoes the pattern of other financial downturns.

“No matter what, those who have money will do well,” he said.

The combined wealth of the 16 richest crypto billionaires exceeded $135 billion in March, according to Forbes. rated. As of this week, the total was about $76 billion, but one billionaire bore most of the losses. Changpeng Zhaothe CEO of the Binance crypto exchange, whose net worth dropped from $65 billion to $17.4 billion.

Cameron and Tyler Winklevoss, whose fortune was $4 billion a piece before the crash, each one was worth $3.3 billion this week, according to Forbes. They declined to comment.

For retail investors like Ben Thompson, 33, the reality is different. mr. Thompson, who lives in Sydney, Australia, lost about $45,000 – half of his life savings – in the crash. He has been involved in cryptocurrencies since 2018 and planned to use the money to open a brewery.

“A lot of people who seemed quite respectable had a lot of credibility,” Thompson said. “Lesser people get the edge.”

The uneven effects of the collapse are evident even for crypto companies. Coinbase, the largest crypto exchange in the US, became public in April 2021 when interest in digital currencies grew. As part of the company’s public listing, Brian Armstrong, the chief executive, sold almost $300 million worth of shares. In December he reportedly bought a $133 million estate in the Los Angeles area of ​​Bel Air.

In total, six top Coinbase executives have sold more than $850 million worth of shares since April 2021, according to data from Equilar, which tracks executive compensation. Emily Choi, chief operating officer, received about $235 million, while Surojit Chatterjee, chief product officer, sold $110 million worth of shares. Coinbase shares, which peaked around $357 in November, are now trading at $51.

This month, as Coinbase struggled with falling prices and declining consumer interest in cryptocurrency, it laid off 18% of its staff, or about 1,100 people. mr. Armstrong said the company “Rehired”.

Coinbase has also canceled hundreds of job offers. Some of these new hires have already quit their previous jobs or relied on Coinbase to keep their positions. work displayed.

Michael Doss, Product Manager, joined Coinbase in May after months of interviews. He canceled the lease and made arrangements to move to the UK and join the company’s London venture when Coinbase withdrew the offer.

“I need to spin it all,” Doss, 33, said. “That’s what I saw as a career-building step.”

A spokesperson for Coinbase declined to comment on the layoffs and canceled offers. She said that many of the share sales were part of the direct listing process and that executives “retain large positions within the company, which reflects their commitment.”

The cryptocurrency crash began in May, when an experimental coin called TerraUSD lost almost all of its value almost overnight, destroying sister digital currency Luna as well. Its collapse devastated some retail traders who spent their savings on TerraUSD through the Anchor Protocol, a lending program that allowed investors to deposit the coin and receive interest rates up to 19.5%.

TerraUSD was launched by Terraform Labs, a startup that has raised funding from venture capital firms including Galaxy Digital and Lightspeed Venture Partners. Some of these investors cashed out before the project collapsed. Galaxy Digital said in a statement prior to the collapse, sales of its Luna assets were the “biggest contribution” to $355 million in first-quarter earnings. (The company declined to comment for this article.)

The effects of the Luna-Terra crash have spread, hitting the prices of bitcoin and ether, two of the most valuable digital currencies. Last year Elliot Liebman, 30 musician in Austin, Texas, began investing a portion of every paycheck in some of these currencies, hoping to accumulate savings. Of his $10,000 investment, about $3,000 remained.

“They say this technology will level the playing field,” said Mr. K, Liebman said. “It’s clear that many people are on the wrong side of trading.”

The crash deepened this month when cryptocurrency bank Celsius Network announced it would stop withdrawing funds. As prices dropped, Gemini became the first major crypto firm to announce layoffs, followed by BlockFi, Crypto.com, and Coinbase.

However, unlike Coinbase, the vast majority of these cryptocurrency companies are privately owned, which means that their value is less affected by daily price fluctuations. This provided the leaders of some companies with some protection.

“My personal wealth probably didn’t take a big hit,” said Ivan Soto-Wright, chief executive of MoonPay. Launch of $3.4B Cryptocurrency Payments. “We have a significant cash reserve.”

mr. soto-wright recently bought The $38 million, seven-bedroom Miami mansion, spa and summer kitchen, according to Zillow. He said he was trying to build a studio where MoonPay artists could come to make music.

“It’s almost like a hacker’s house,” he said. “It was a good investment.”

The Winklevoss started hoarding bitcoins in 2012 when their price was hovering below $10. Even after the crash, it remains an extremely profitable investment for them: Bitcoin peaked at almost $70,000 in November and is now approaching $20,000. The Winklevosses founded Gemini in 2014 and have since raised $400 million from investors.

The brothers founded their band Mars Junction as a project to fight the pandemic. As the cryptocurrency market crashed this month, they started their tour with show in Asbury Park, New Jersey

“The contract I made with myself was that it would be fun,” said Tyler Winklevoss, lead singer. wrote in the blog about the group.

Last week, about 50 spectators watched their performance at the Gothic Theater in Engelwood. The two women showed up wearing Harvard sweatshirts they bought on eBay as a tribute to the campus where the Winklevosses lived. fought Mark Zuckerberg for control of Facebook. The concession stall sold branded merchandise, including hats, T-shirts, and tote bags; according to Tyler’s blog post, the piece will go to MusiCares, a charity that helps musicians recover from addiction.

Over the course of the 90-minute set, the Winklevosses performed a series of classic rock musicians with Cameron on guitar. A small group danced in front of the stage, playing a cover of a Red Hot Chili Peppers song.

“Hit me,” Tyler howled into the microphone. “You can’t hurt me.”