It’s been a few weeks since the crypto crowd was partying in Miami.
Brian Armstrong, the founder of Coinbase Global Inc., had a personal fortune of $13.7 billion in 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 digital currency selloff from Bitcoin to Ether sparked a precipitous drop in the market value of Coinbase, the largest US cryptocurrency exchange.
Shares of the company are down 84% since its first day of trading in April 2021, closing at $53.72 on Wednesday after the company warned that trading volume and monthly trades were expected to be lower in the second quarter than in the first. .
It raises questions about Coinbase’s ability to withstand the sharp drop in crypto prices, forcing Armstrong to take to Twitter to defend the company. There is “no risk of bankruptcy” even during a “black swan” event and users’ money is safe, said Armstrong, the company’s CEO.
Then there’s Michael Novogratz. The CEO of crypto trading bank Galaxy Digital has seen his fortune plummet to $2.5 billion, from $8.5 billion in early November. He was a champion of TerraUSD, the algorithmic stablecoin that is now at risk of a complete collapse amid a collapse in the price of a crypto token in the same ecosystem, Luna.
“I am probably the only man in the world who has both a Bitcoin tattoo and a Luna tattoo,” Novogratz said at the Bitcoin 2022 conference in Miami on April 6.
— Mike Novogratz (@novogratz) January 5, 2022
Billionaire crypto fortunes that have grown over the past two years are disappearing after a sell-off that started with tech stocks transitioning into digital money. Bitcoin, the most popular cryptocurrency, and Ether are both down more than 50% since their all-time highs late last year.
While nearly all crypto holders have suffered asset declines, some of the biggest and most visible losses have been centered on exchange founders, where traders buy and sell digital currencies.
On paper, Changpeng Zhao, the CEO of Binance, has lost an even greater fortune than Armstrong or Novogratz. He debuted in January on the Bloomberg wealth index with a net worth of $96 billion, one of the world’s largest. By Wednesday, that had dwindled to $11.6 billion, using the average business value for sales multiples from Coinbase and Canadian crypto firm Voyager Digital as the basis for the calculations.
Crypto exchanges in the US seem to be suffering more from a downturn than their global competitors. Trading volumes at Coinbase have fallen steadily since the beginning of the year, while the more internationally-focused Binance saw a surge in volume last month. By comparison, Binance’s US-focused business saw even more steep declines than Coinbase’s.
Tyler and Cameron Winklevoss, co-founders of rival crypto exchange Gemini, have each lost about $2.2 billion – or about 40% – of their assets this year. The fortune of Sam Bankman-Fried, CEO of crypto exchange FTX, has halved to about $11.3 billion since late March.
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% 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 owns a 4.5% stake and controls 26% of its voting shares.
Coinbase’s bonds have also fallen, recently trading in line with some of the riskiest junk-rated bonds.