It’s been a few weeks since the crypto crowd celebrated in Miami.
Coinbase Global Inc. founder Brian Armstrong had a personal net worth of $13.7 billion as of 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 sell-off in digital currencies from bitcoin to ether triggered a precipitous drop in the market value of Coinbase, the largest U.S. cryptocurrency exchange.
Shares of the company are down 84% since their first day of trading in April 2021 to close at $53.72 on Wednesday after the company warned that trading volume and monthly active users 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’s “no risk of bankruptcy,” even in a black swan event, and users’ funds are safe, said Armstrong, the company’s chief executive officer.
Then there is Michael Novogratz. Crypto merchant bank Galaxy Digital CEO’s fortune has plummeted to $2.5 billion from $8.5 billion in early November. He has been a proponent of TerraUSD, the algorithmic stablecoin now at risk of full collapse due to a price drop of a crypto token in the same ecosystem, Luna.
“I’m probably the only guy in the world who has both a bitcoin tattoo and a luna tattoo,” Novogratz said April 6 at the Bitcoin 2022 conference in Miami.
– Mike Novogratz (@novogratz) January 5, 2022
Billionaire crypto fortunes that have swollen over the past two years are disappearing after a sell-off that started with tech stocks spilling over into digital money. Bitcoin, the most popular cryptocurrency, and ether are both down more than 50% since their record highs late last year.
While almost all crypto owners have suffered declines in wealth, some of the biggest and most visible losses are centered on the founders of exchanges where traders buy and sell digital currencies.
At least on paper, Changpeng Zhao, the CEO of Binance, has lost an even bigger fortune than Armstrong or Novogratz. He debuted in the Bloomberg Net Worth Index in January with a net worth of $96 billion, one of the largest in the world. By Wednesday, that had shrunk to $11.6 billion, using average enterprise value-to-sales by Coinbase and Canadian crypto firm Voyager Digital as the basis for the calculations.
Crypto exchanges in the US appear to be suffering more from a downturn than their global peers. Trading volume on Coinbase has been steadily declining since the beginning of the year, while the more international-focused Binance has seen volume increase over the past month. By comparison, Binance’s US-focused business saw even sharper 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 wealth this year. Crypto exchange FTX CEO Sam Bankman-Fried’s wealth has fallen by half since late March to around $11.3 billion.
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 stock, according to the company’s 2022 proxy statement, while Ehrsam owns a 4.5% stake and controls 26% of its voting stock.
Coinbase’s bonds have also plummeted, recently trading in line with some of the riskiest junk notes.