All the Major Layoffs, Record Withdrawals, and Bankruptcies Caused by the $2 Trillion Collapse

Embattled crypto lender Celsius filed for bankruptcy this week, the latest casualty of a bear market that continues to leave a path of destruction in the digital currency industry.


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ears of global recession and the worst inflation in more than 40 years wreaked havoc on the burgeoning cryptocurrency market this year – starting a severe crypto winter that once forced high-flying firms into bankruptcy and thrust investors into panic selling mode. The turmoil has already claimed trillions of dollars in market capitalization, billions of dollars in frozen funds and thousands of jobs, but the current losses may be just the beginning of the storm.

“There will be others who come forward with the issue – I don’t think it will end here,” says Marcus Sotiriou, an analyst at London digital asset broker GlobalBlock. forbesnotes that nearly a dozen companies, including Peter Thiel-backed Vauld, are facing an uncertain fate after withdrawing customers from their funds or embarking on restructuring processes last month. “There will be a period of constant pain,” she says.

No one can predict whether the current crypto bear market will compete with the years-long crypto winters of 2014 and 2018; second, it wipes out 80% of bitcoin price while crushing hundreds of new tokens. This decline could last for up to 12 months unless persistent inflation cools off soon, Sotiriou said, allowing the Federal Reserve to soften aggressive rate hikes that make risky assets less attractive to investors. Analysts are not so sure that this will happen.

Matteo Dante Perruccio, partner at crypto investment firm Wave Financial, predicts that it will take at least six months and up to two years for crypto prices to recover. loops past. “This time around, however, there is a difference,” he adds, pointing to a wave of institutional currencies like Tesla, Goldman Sachs, Morgan Stanley and more that have driven widespread adoption during the pandemic: an underappreciated market, less speculation, and more tried-and-true money. It will be more sustainable and healthier with its real investment philosophy.”

As crypto investors await brighter days ahead, forbes All the carnage in the latest crypto winter, including layoffs, price drops, and record sales, follows along with lifelines and acquisitions that could help soften the blow. Here’s the damage so far:


Trillions of Values ​​Deleted

Low interest rates and government stimulus measures have fueled cryptocurrency prices, which skyrocketed during the pandemic, but the Federal Reserve’s decision to curb rising inflation by raising interest rates has since battered investor sentiment, leading to some of the crypto market’s biggest losses in history. According to CoinGecko, after accumulating a record over $3 trillion in November 2021, the cryptocurrency market posted its worst first half ever, dropping nearly 60% this year to nearly $920 billion.

Terra’s luna token, once a top cryptocurrency worth over $40 billion, lost almost all of its value in a week after sister token TerraUSD, a stablecoin intended to hold a price of $1 in May, broke the dollar rate. markets crashed. Meanwhile, top cryptocurrencies bitcoin, ether, and BNB fell 70%, 75%, and 65%, respectively, from record highs. It took years for the market to recover from similar dips: When increased regulation kicked off a severe crypto winter in 2017, it took more than 1,000 days for the world’s largest cryptocurrency to hit a new high.


Thousands laid off

Faced with sharp market declines, cryptocurrency companies laid off more than 2,000 workers in less than five weeks. By far the biggest hit, popular brokerage Coinbase announced its 1,180 employees, or about 18% of its workforce, on June 14, 14 weeks after the company’s billionaire CEO Brian Armstrong warned investors that a potential recession could lead to a prolonged bear market. he was fired. cryptocurrencies. In a note announcing the layoffs, Armstrong said he was planning “the worst” and acknowledged that the firm was “growing very quickly” during the pandemic bull market. “It was surprising and difficult,” one former employee said on LinkedIn. Others described the outages as “sudden” and “sudden”.

Also in June, exchange Gemini, founded by the billionaire Winklevii twins, said it would lay off about 10% of its 1,000 employees. crypto.com and BlockFi said they will terminate 5% and 20% of the workforce, affecting 260 and 170 employees, respectively. Since then, lending platform Celsius has reportedly laid off 150 workers and Austrian trading platform Bitpanda has cut 270 jobs, calling the move “necessary”. . . to navigate the storm and come out financially healthy. ”


Sales record

Investors have piled up from crypto mutual funds at a record pace as Bitcoin plunged to an 18-month low last month. According to crypto asset management firm CoinShares, exits totaled $423 million in the week of June 17, wiping out nearly all entries this year, eclipsing the previous record of $198 million in January. CryptoCompare analysts noted in a report that turbulence pushed assets under the management of crypto investment products to a record low of $21.6 billion last month, down 37% from May to $21.6 billion. Meanwhile, Bank of America reported that the number of customers using cryptocurrencies has dropped more than 50% since the market high in November, falling below 500,000.

Even emerging crypto firms had to take the changing market into account. Last week, top miner Core Scientific announced that it sold most of its bitcoin stack in June at an average cost of $23,000, raising more than $167 million. In a statement, CEO Mike Levitt attributed the sales to “enormous stress” caused by weak markets, high interest rates and “historic inflation”. Canada-based Bitfarms, which made headlines in January by joining Tesla and former billionaire Michael Saylor’s MicroStrategy by buying bitcoin for its balance sheet, dumped a large sum late last month, dropping 3,000 bitcoins, or nearly half of its stack.

“It is typical for Bitcoin miners to sell in the final stages of a bear market,” Sotiriou explains, noting that due to high inflation operating costs, some firms may need to set aside funds to cover expenses or continue paying off debt.


Billions of Frozen Cash

Citing “extreme market conditions,” crypto lender Celsius became the first major platform to pause withdrawals and transfers between client accounts on June 13. Within days, others did the same: Babel Finance, CoinFLEX, and Voyager froze withdrawals. None have re-enabled access, thus rendering billions of dollars of funds inaccessible to their investors.

“They’re in a really difficult situation because they were irresponsible with customers’ funds, somehow lost it, and now they can’t pay their customers back – and there’s no guarantee they’ll pay back the money,” Sotiriou explains. Publicly traded Coinbase warned of the risk in its most recent quarterly filing, disclosing customers will be treated as “unsecured creditors” or unsecured lenders should the company go bankrupt.


Bankruptcy and Liquidation

A handful of crypto firms simply crash. On June 27, Voyager issued a notice of default to the beleaguered Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to pay off $675 million in bitcoin and stablecoin loans. 3AC at one point managed $3 billion, but Singapore financial regulators denounced the firm late last month, saying it had misinformed and only had the authority to manage up to $250 million. On top of that, 3AC’s problems were exacerbated by the impact of sales on its risky investments; These include over-leveraged bets on the Grayscale Bitcoin Trust and reportedly about $200 million in currently worthless Luna. On June 29, it was reported that a British Virgin Islands court ordered 3AC to liquidate its assets, deeming the company bankrupt; filed for Chapter 11 bankruptcy the same day.

With 3AC’s fate sealed, Voyager filed for bankruptcy on July 5 – just four days after it suspended trading. “While we believe strongly in this future, the prolonged volatility and contagion in the crypto markets requires that we take deliberate and decisive action now,” Voyager CEO Stephen Ehrlich said in a statement. In a court filing, the firm disclosed that it has more than 100,000 creditors and up to $10 billion in assets.

The next casualty was Celsius, and it filed for Chapter 11 bankruptcy on July 13. It listed assets between $1 billion and $10 billion, debt in the same range, and dozens of loans, each with millions of dollars, from the likes of crypto billionaire Sam Bankman-Fried. Alameda Research, brokerage firm Covar.io and investment firm Invictus Capital. “This is the right decision for our community and company,” co-founder and CEO Alex Mashinsky said in a statement.

More to come soon: After pausing withdrawals, Vauld also announced that it is exploring restructuring options.


Lifelines and War Chests

Some crypto companies hope to be rescued before they are forced to close their doors by turning to their more stable counterparts. On July 1, Bankman-Fried’s FTX signed an agreement to acquire the warring BlockFi for $240 million. “You know, if that’s what it takes to stabilize things and retain customers, we’re prepared to have a bit of a bad deal here,” he said. forbes after providing BlockFi and Voyager with a $750 million line of credit between FTX and quantitative trading firm Alameda last month. More recently, he said FTX has “a few billion more” to help struggling companies.

Meanwhile, Goldman Sachs is reportedly trying to raise $2 billion to buy distressed assets from Celsius, and other legacy institutions are also showing interest. “There’s a backlash from the series that if you really believe the fundamentals of a long-term lawsuit are strong, while everyone else is stumbling around, then it’s time to double down. ” When asked what the third crypto winter might be last month, it’s the first in the industry to allow bitcoin in 401(k) plans. “This is usually the right move.”

“It’s incredibly encouraging,” says Dante Perrucio. “Large institutions looking for troubled cryptoassets mean they believe the industry will bounce back and come back strong, despite this very complex time we are in.”

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