Damage to the bear market
Crypto billionaires are becoming a rare breed. When Vitalik Buterin revealed that he was no longer a billionaire in May, the Ethereum founder spoke for many of the ultra-rich in cryptocurrency. A number of the richest founders have lost billions of dollars in net worth to the bear market of 2022, or “crypto winter”.
According to Forbes, the number of crypto-billionaires on the Forbes 400 list of the richest people in the United States dropped from seven in 2021 to four this year. Their combined wealth fell accordingly, from $55.1 billion to $27.3 billion, it said.
It comes as cryptocurrency stocks have been hit hard by a sharp price decline following the collapse of the Terra blockchain in May. Bitcoin (BTC) is down more than 70% from its November 2021 all-time high of $69,000.
Every other major cryptocurrency coincided with bitcoin. Ethereum (ETH), the second largest digital asset, has fallen 75% from an all-time high. Solana (SOL), Cardano (ADA) and Binance Coin (BNB) are all in the red.
In total, the value of all crypto assets has fallen from over $3 trillion in November to $967 billion, per Coinmarketcap data. This year’s bear market is unprecedented in some ways.
It represents a combination of difficult macroeconomic conditions, geopolitical tensions and questionable projects/decisions by crypto entrepreneurs. Bitcoin Fear and Greed Index, a tool which tracks momentum levels in the industry, currently reads “extreme fear.”
Crypto Billionaires and Their Declining Fortunes
In June, bitcoin fell below $18,000 – and with it the fortunes of a few crypto founders and backers.
Sam Bankman-Fried, co-founder and CEO of crypto exchange FTX, is down 23% since his fortune reached $22.5 billion in the past year, according to Forbes. With a net worth of $17.2 billion, Bankman-Fried remains the richest person in crypto. He is ranked number 41 on the Forbes 400 list.
The 30-year-old made big moves this year. He gave away $16 million to super PACs in April, making him one of the top donors. He also plans to give between $100 million and $1 billion during the next US presidential election to support Democrats.
In crypto, Bankman-Fried has become a kind of messiah. In June, he lent $400 million to BlockFi through FTX. There was an option to buy the troubled crypto lender outright for up to $240 million.
He also made a $500 million loan to bankrupt lender Voyager Digital through one of his companies Alameda Research. Bankman-Fried is planning more acquisitions, according to industry media, fueled by a cash pile of around $2 billion at FTX.
Ripple’s Chris Larsen
Chris Larsen, co-founder and chairman of crypto payments firm Ripple Labs, saw his fortune drop from $6 billion to $2.8 billion in the past year. The 62-year-old’s net worth fell after Ripple’s XRP native token crashed 75% since last year.
Ripple has also been affected by its protracted legal battle against the US Securities and Exchange Commission. It won the case a few days ago. Over the past two weeks, the price of XRP has risen more than 30% to $0.4595 at press time.
Larsen remains on Forbes’ rich list at number 380. The business executive and angel investor has shied away from making public comments on the SEC filing, though he continues to engage publicly about Bitcoin.
Considered Bankman-Fried’s right-hand man, Gary Wang co-founded both Alameda Research and FTX. The 29-year-old software engineer is worth $4.6 billion. He enters the Forbes 400 rich list at number 227.
Wang owns 16% of FTX, where he is chief technology officer. He worked at Google “where he formulated systems intended to collect prices for millions of flights.” While Wang maintains a private life, he is credited with leading FTX’s growth in the same vein as Bankman-Fried.
Fallen from grace
Coinbase Global’s Brian Armstrong (39) and co-founder Fred Ehrsam (34) were once worth a combined $15 billion. They have seen their fortunes collapse to $2.7 billion and $1.1 billion as shares in the firm plunged 80% since its IPO last April.
While Armstrong retains his spot on the Forbes 400 list at number 388, the founder may have seen one of the biggest declines in fortune. This time last year, he was worth $11.5 billion. Ehrsam, who left Coinbase in 2017, fell off the rich list after his value dropped from $3.5 billion.
The bear market has taken a toll on Coinbase, the largest US crypto exchange. Quarterly trading volume nearly halved to $277 billion during the fourth quarter of 2021, compared to the previous three months. The exchange makes money by charging fees on trades.
Coinbase also laid off 18% of its workforce in June, citing the possibility of a recession that could lead to an extended bear market. “We were growing too fast,” Armstrong said at the time.
“Our staff costs are too high to effectively manage this uncertain market. The actions we take today will allow us to navigate this period more confidently even if it is seriously extended.”
Cameron and Tyler Winklevoss saw their fortunes drop to $2.2 billion each, from as high as $4.3 billion apiece. With markets crashing, the 40-year-old twin founders of crypto exchange Gemini have taken to music. They have gone on tours with the rock band Mars Junction.
Both have dropped from the Forbes 400 list. Geminin announced in June that it would cut around 10% of its stuff due to adverse market conditions.
Crypto Billionaires: Will They Reclaim Their Fortunes?
There are several crypto tycoons who remain billionaires who are not included in the Forbes 400 list of wealthy people. Entrepreneurs like Changpeng Zhao of Binance, Mike Novogratz of the hedge fund Fortress Investment Group and others have lost billions in the market downturn.
However, bear markets are not a rare occasion in the digital market spectrum. Therefore, it is not surprising that crypto-fanatics claim that the events are only temporary – as much as they remain hopeful that things will turn for the better in the near future.
Buterin, the Ethereum confounder, has previously hinted that he would welcome lower crypto prices. In February, he told Bloomberg News: “The people who are deep into crypto, and especially construction stuff, a lot of them welcome a bear market.”
Fred Ehrsam, Coinbase co-founder and board member, tweeted: “One thing most people don’t fully understand: it takes years, often decades, to go from a new technology breakthrough at the infrastructure level (like crypto) to a vibrant ecosystem of mainstream applications.”
The Winklevoss twins say their investments are long-term. “It’s all about perspective and HODLing for the long game,” Cameron Winklevoss wrote on Twitter in May.
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