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REPUBLICA PRESS
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Armstrong, Brian (1983- )

Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic

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Cryptocurrency prices also dropped precipitously. The price of Bitcoin fell as low as $26,000 on Thursday, down 60 percent from its peak in November, before rising somewhat. Since the start of the year, Bitcoin’s price movement has closely mirrored that of the Nasdaq, a benchmark that’s heavily weighted toward technology stocks, suggesting that investors are treating it like any other risk asset.

The price of Ether plunged, too, losing more than 30 percent of its value over the last week. Other cryptocurrencies, like Solana and Cardano, are also down.

Any panic might be overblown, some analysts said. A study by Mizuho showed that the average Bitcoin owner on Coinbase would not lose money until the digital currency’s price sank below $21,000. That, according to Mr. Dolev, is where a true death spiral could occur.

“Bitcoin was working as long as no one lost money,” he said. “Once it gets back to those levels, that’s sort of the ‘Oh, my God’ moment.”

Professional investors who have weathered past crypto volatility also stayed calm. Hunter Horsley, chief executive of Bitwise Asset Management, which provides crypto investing services to 1,000 financial advisers, met with more than 70 of them this week to discuss the market. Many were not selling, he said, because every other asset was down, too. Some were even trying to capitalize on the drop.

“Their standpoint is, ‘This is no fun, but there is nowhere to hide,’” he said.

Still, the plummeting prices have rattled crypto traders. Just a few months ago, blockchain proponents were predicting that Bitcoin’s price could rise as high as $100,000 this year.

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Kevin Durant and Nas Stand to Win Big From Coinbase Debut

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Heavy trading volume greeted the highly anticipated market debut of Coinbase on Wednesday, which ended the day worth some $86 billion. The cryptocurrency company’s coming-out party made some insiders very rich, opened up new possibilities for cementing its position in the blockchain economy and blazed a trail for other crypto companies to follow its lead onto the public markets, the DealBook newsletter writes.

The stake held by Brian Armstrong, Coinbase’s co-founder and chief executive, is now worth roughly $13 billion. Shares held by its other co-founder, Fred Ehrsam, are worth about $6.7 billion. (Andreessen Horowitz’s stake is worth $11.2 billion, while Union Square Ventures’ holding is worth $5.3 billion.) Other investors who stand to collect big paper profits — if they held on to their shares — include the National Basketball Association star Kevin Durant, the rapper Nas and Alexis Ohanian, a co-founder of Reddit.

The market listing makes it easier for Coinbase to negotiate mergers and acquisitions. “We want to be able to have a public mark on our stock price because it helps us do more and more M.&A.,” Emilie Choi, the company’s chief operating officer, told the technology site Protocol. “There’s so much innovation happening in the crypto ecosystem, and we can’t possibly do it all in-house.” But the listing also brings more scrutiny of the company’s internal culture, which has included accusations of unfair treatment of Black and female employees and poor customer service.

Coinbase could lead the way for others. The tech investor Ron Conway called Coinbase “the Google for the crypto economy.” As crypto goes mainstream, others with similarly big ambitions may follow Coinbase onto the public markets, including rival markets like Binance, the biggest crypto exchange, and Gemini, the company founded by the Winklevoss twins. Exchange-traded funds that hold Bitcoin and other cryptocurrencies directly also haven’t yet been approved by the S.E.C., but proponents believe that could happen soon.

original Hacker News post from March 2012 looking for a co-founder for his crypto venture, which drew dismissive comments like, “Because bitcoin worked out so well. Have fun with that, dude.” Bitcoin was worth about $5 then; it’s more than $60,000 now.

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Coinbase Could Lead a Crypto Charge Into Public Markets

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The answer, in short, is as big as a financier can dream. This week, a blank-check firm that raised $500 million in its I.P.O. got $4 billion in additional funding from private investors to merge with Grab in a deal worth $40 billion. That’s a difference of nearly 8,000 percent between the cash in the SPAC and the value of the company that will take over its listing. It’s the largest ratio on record, according to data from SPAC Research.

The size of a SPAC is only loosely related to that of the target it seeks. Additional funding these companies arrange alongside a merger allows them to take on bigger targets, and the bigger the target, the less dilutive the SPAC sponsor’s stake in the combined entity, making it more attractive to other shareholders. So far this year, the value of announced SPAC mergers has been more than 800 percent larger, on average, than the cash in the SPACs; that’s up from roughly 600 percent last year and 400 percent in 2019.

  • More than 400 SPACs now seeking acquisitions are together sitting on $140 billion, so applying the current ratio implies a potential deal value of $1.3 trillion, roughly the value of all M.&A. deals in the U.S. last year. (Using Grab’s outsize ratio, it would be a whopping $11 trillion.)

Jon Kelly, a former Vanity Fair editor, plans to launch a new media company with an unusual business model, Ed Lee and DealBook’s Lauren Hirsch report for The Times. The venture has raised about $7 million from investors, including the private equity firm TPG. Notably, it will pay its yet-to-be-named writers a portion of the subscription fees they personally generate, creating a compromise between the dominant business models of old and new media companies.

Upstart media brands are betting on star power to drive subscriptions. Mr. Kelly’s new venture, which may be called Puck, the name of an American humor magazine of the late 1800s and early 1900s, plans to use its revenue-sharing model to attract big-name writers. The push to “monetize individuality” has attracted increasingly high-profile figures to new platforms: Substack offers lucrative contracts to select writers who use it to launch newsletters.

Established companies rely more on prestige, breadth and experience. The largest media companies lean on their brands to attract both talent and subscribers.

It gets murky in the middle. Digital media players like BuzzFeed, Vice, Vox Media and Group Nine rely more on ads than subscriptions, and they’ve stumbled as the pandemic has ravaged that industry. In an increasingly crowded, differentiated field, they’re trying to bulk up via mergers or go public to raise funds and satisfy early investors.

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Why Coinbase’s IPO Is a Cryptocurrency Coming-Out Party

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SAN FRANCISCO — Digital currency, once mocked as a tool for criminals and reckless speculators, is sliding into the mainstream.

Traditional banks are helping investors put their money into cryptocurrency funds. Companies like Tesla and Square are hoarding Bitcoin. And celebrities are leading the way in a digital-art spending spree using a technology called an NFT.

On Wednesday, digital or cryptocurrencies will take their biggest step yet toward wider acceptance when Coinbase, a start-up that allows people to buy and sell cryptocurrencies, goes public on Nasdaq. Coinbase shares received a reference price of $250 each on Tuesday evening, which would value the company at $65 billion based on all its outstanding shares.

Call it crypto’s coming-out party. Coinbase, founded in San Francisco, is the first major cryptocurrency start-up to go public on a U.S. stock market. It is doing so at a valuation that tops that of Capital One Financial Corporation or Moody’s, the ratings agency.

plan to “create an open financial system for the world” and “increase economic freedom.”

But so far, cryptocurrency is mostly a vehicle for financial speculation and trading. Few people want to use Bitcoin for everyday purchases like coffee because its price is so volatile. Many early buyers have become wildly rich by simply holding their crypto or “buying the dip” when prices fall. Others ruefully relay tales of the sushi dinner they bought with Bitcoin years ago that would be worth $200,000 today or the million-dollar pizza.

Coinbase eases that trading by acting as a central exchange. Before it and similar services were created, people had to set up their own digital wallets and wire money.

“Can it be anything more than an asset class?” Mr. Tusk asked. “That’s still very much up in the air.”

Silk Road, a marketplace for buying and selling drugs and weapons with Bitcoin until the federal authorities shut it down, and Mt. Gox, a crypto exchange that collapsed under accusations of theft and embezzlement, further tarnished the young industry.

Coinbase tried to change that. The company joined Y Combinator, a prestigious start-up program, and raised money from top venture capital firms including Union Square Ventures and Andreessen Horowitz.

Mr. Armstrong was one of the few people in the industry who seemed prepared to comply with inevitable regulations, rather than cut corners to avoid them, said Nick Tomaino, who dropped out of business school to join Coinbase in 2013.

Coinbase also persuaded well-known retailers to accept Bitcoin. “It was good for credibility when people saw you could actually use a Bitcoin to buy a mattress at Overstock,” Mr. Tomaino, who left in 2016, said. Coinbase earned money on transaction fees.

But Bitcoin’s wildly volatile price and a slow computer network that managed it made transactions difficult, and people began to see the currency as an investment. In 2015, Ethereum, a cryptocurrency network with more tech abilities, was introduced, enticing enthusiasts to build companies and funds around the technology.

Soon after, a flood of “initial coin offerings,” where companies sold tokens on the promise of the technology they planned to build, created a new boom in cryptocurrency trading. But it quickly deflated after many projects were found to be frauds and U.S. regulators deemed the offerings to be securities, requiring that they comply with financial rules.

Tesla to buy $1.5 billion worth of Bitcoin and the payments company Square to spend $170 million. In March, Morgan Stanley began offering its wealthy clients access to three Bitcoin funds, and Goldman announced that it would soon offer similar access. The mayor of Miami has proposed that the city accept tax payments in Bitcoin and invest city funds in the asset.

The stock trading app Robinhood announced that 9.5 million of its customers had traded cryptocurrency in the first three months of the year — up more than fivefold from the previous three months. Venture funding for crypto-related start-ups surged to its highest-ever level in the first quarter to $3 billion, according to PitchBook.

PayPal recently added a crypto trading and shopping feature for its customers in the United States. The company was motivated by consumer interest and advances in the technology that made transactions faster. It plans to quickly expand the offering to customers around the world.

“It feels like the time is right,” said Jose Fernandez da Ponte, head of PayPal’s blockchain, crypto and digital currencies group. “We think this has the potential to revolutionize payments and financial systems in general.”

Still, the so-called revolution faces some challenges. Coinbase has sometimes struggled to keep up with demand, with some customers who lost access to their accounts complaining that the company has been unresponsive. It has also received criticism for its treatment of female and Black employees.

Treasury Secretary Janet L. Yellen has threatened harsher regulation of the currencies, including limiting their use.

And a big drop in prices could again send speculators fleeing. In its financial prospectus, Coinbase warned that its business results would fluctuate with the volatility of crypto assets, “many of which are unpredictable and in certain instances are outside of our control.”

The industry’s biggest issue — fulfilling the promise that the technology is more than just a place to park money — could take another decade to play out.

“There’s no doubt we’re in the latest boom, and I don’t know if that’s going to turn tomorrow or two years from now,” Mr. Tomaino said. “But the busts and booms are always higher than the last.”

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