Crypto billionaires see their wealth destroyed as rout deepens

The crypto community has been partying in Miami for a few weeks now.

Brian Armstrong, the founder of Coinbase Global, had a personal worth of $US13.7 billion ($19.7 billion) in November and $US8 billion at the end of March. Following a selloff in digital currencies from Bitcoin to Ether, the market value of Coinbase, the largest US cryptocurrency exchange, has plummeted to just $US2.2 billion, according to the Bloomberg Billionaires Index.

The business’s shares have dropped 84% since their first day of trading in April 2021, closing at $US53.72 on Wednesday after the company warned that trade volume and monthly transacting users would be lower in the second quarter than in the first.

It has raised doubts about Coinbase’s ability to withstand the dramatic drop in crypto values, prompting Armstrong to defend Twitter. Even in a “black swan,” there is “no risk of bankruptcy,” and consumers’ cash is protected, according to Armstrong, CEO.

Michael Novogratz is another example. From $US8.5 billion in early November, the CEO of crypto merchant bank Galaxy Digital has seen his worth collapse to $US2.5 billion. He’s been a supporter of TerraUSD, an algorithmic stable coin that’s now in danger of collapsing due to the price of Luna, a cryptocurrency in the same ecosystem.

Novogratz said on April 6 at the Bitcoin 2022 conference in Miami, “I’m probably the only guy with both a Bitcoin tattoo and a Luna tattoo.”

A selloff that started with internet equities spilled over into digital money, wiping out Billionaire crypto riches that had grown over the last two years. Bitcoin, the most popular cryptocurrency, and Ether, the second most popular cryptocurrency, have dropped more than 50% from their highs late last year.

While practically all crypto investors have lost money, some of the biggest and most apparent losses have been concentrated among exchange founders, who purchase and sell digital currencies.

Changpeng Zhao, the CEO of Binance, has lost an even larger fortune than Armstrong or Novogratz, at least on paper. In January, he debuted on the Bloomberg wealth index with a net worth of $US96 billion, making him one of the world’s wealthiest people. Using the average enterprise value to sales multiples of Coinbase and Canadian crypto business Voyager Digital as a foundation for the estimates, it had dropped to $US11.6 billion by Wednesday.

Crypto exchanges in the United States look to be worse than their international counterparts. Coinbase’s trading volumes have been progressively declining since the beginning of the year, whereas Binance, which is more internationally focused, witnessed an increase in volume last month. Binance’s US-focused business has seen even sharper drops than Coinbase’s.

Tyler and Cameron Winklevoss, co-founders of rival crypto exchange Gemini, have lost nearly $US2.2 billion this year, or roughly 40% of their worth. Since the end of March, Sam Bankman-Fried, CEO of crypto exchange FTX, has dropped by half to around $US11.3 billion.

Armstrong isn’t the only billionaire who has lost money on Coinbase. Fred Ehrsam, a co-founder and former Goldman Sachs Group trader, is worth $US1.1 billion, down more than 60% this year.

According to Coinbase’s 2022 proxy statement, Armstrong owns 16 percent of the company and controls 59.5 percent of the voting stock, while Ehrsam owns 4.5 percent and controls 26 percent of the voting stock.

Coinbase’s bonds have also fallen in value, recently trading at levels comparable to some of the riskiest junk-rated notes.