Bitcoin Plummets Below $20,000 for First Time Since Late 2020

Square, another payments company, bought $50 million of Bitcoin and changed its name to Block, in part to signify its work with blockchain technology. Tesla bought $1.5 billion of it. The venture capital firm Andreessen Horowitz raised $4.5 billion for a fourth cryptocurrency-focused fund, doubling its previous one.

Excitement hit a peak in April last year when Coinbase, a cryptocurrency exchange, went public at an $85 billion valuation, a coming-out party for the industry. Bitcoin topped $60,000 for the first time.

Last summer, El Salvador announced that it would become the first country to classify Bitcoin as legal tender, alongside the U.S. dollar. The country’s president updated his Twitter profile picture to include laser eyes, a calling card of Bitcoin believers. The value of El Salvador’s $105 million investment in Bitcoin has been slashed in half as the price has fallen.

Senators and mayors around the United States began touting cryptocurrency, as the industry spent heavily on lobbying. Mayor Eric Adams of New York, who was elected in November, said he would take his first three paychecks in Bitcoin. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, proposed legislation that would create a regulatory framework for the industry, giving more authority to the Commodity Futures Trading Commission, an agency that crypto companies have openly courted.

Through the frenzy, celebrities fueled the fear of missing out, flogging their NFTs on talk shows and talking up blockchain projects on social media. This year, the Super Bowl featured four ads for crypto companies, including Matt Damon warning viewers that “fortune favors the brave.”

That swaggering optimism faltered this spring as the stock market plummeted, inflation soared and layoffs hit the tech sector. Investors began losing confidence in their crypto investments, moving money to less risky assets. Several high-profile projects crashed amid withdrawals. TerraForm Labs, which created TerraUSD, a so-called stablecoin, and Celsius, an experimental crypto bank, both collapsed, wiping out billions in value and sending the broader market into a tailspin.

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Crypto Firms Quake as Prices Fall

SAN FRANCISCO — No one wanted to miss out on the cryptocurrency mania.

Over the last two years, as the prices of Bitcoin and other virtual currencies surged, crypto start-ups proliferated. Companies that market digital coins to investors flooded the airwaves with TV commercials, newfangled lending operations offered sky-high interest rates on crypto deposits and exchanges like Coinbase that allow investors to trade digital assets went on hiring sprees.

A global industry worth hundreds of billions of dollars rose up practically overnight. Now it is crashing down.

After weeks of plummeting cryptocurrency prices, Coinbase said on Tuesday that it was cutting 18 percent of its employees, after layoffs at other crypto companies like Gemini, BlockFi and Crypto.com. High-profile start-ups like Terraform Labs have imploded, wiping away years of investments. On Sunday, an experimental crypto bank, Celsius, abruptly halted withdrawals.

dropped by about 65 percent since autumn, and analysts predict the sell-off will continue. Stock prices of crypto companies have cratered, retail traders are fleeing and industry executives are predicting a prolonged slump that could put more companies in jeopardy.

stocks crashing, interest rates soaring and inflation high, cryptocurrency prices are also collapsing, showing they have become tied to the overall market. And as people pull back from crypto investments, the outflow is exposing the unstable foundations of many of the industry’s most popular companies.

OpenSea, the largest marketplace for the unique digital images known as nonfungible tokens, reached a staggering $13 billion valuation. And Wall Street banks such as JPMorgan Chase, which previously shunned crypto assets, and Fortune 500 companies like PayPal rolled out crypto offerings.

confidence evaporated in the early 2000s, many of the dot-coms went bust, leaving just the biggest — such as eBay, Amazon and Yahoo — standing.

This time, investors predict there will be more survivors. “You certainly have some overhyped companies that don’t have the fundamentals,” said Mike Jones, an investor at the venture firm Science Inc. “But you also have some really strong companies that are trading way below where they should.”

There have been warning signs that some crypto companies were not sustainable. Skeptics have pointed out that many of the most popular firms offered products underpinned by risky financial engineering.

Terraform Labs, for example, offered TerraUSD, a so-called stablecoin with a fixed value linked to the U.S. dollar. The coin was hyped by its founder, Do Kwon, who raised more than $200 million from major investment firms such as Lightspeed Venture Partners and Galaxy Digital, even as critics warned that the project was unstable.

The coin’s price was algorithmically linked to a sister cryptocurrency, Luna. When the price of Luna plummeted in May, TerraUSD fell in tandem — a “death spiral” that destabilized the broader market and plunged some investors into financial ruin.

drew scrutiny from several state regulators. In the end, a drop in crypto prices appeared to put the company under more pressure than it could withstand.

With the price of Bitcoin tumbling, Celsius announced on Sunday that it was freezing withdrawals “due to extreme market conditions.” The company did not respond to a request for comment.

The market instability has also triggered a crisis at Coinbase, the largest U.S. crypto exchange. Between the end of 2021 and late March, Coinbase lost 2.2 million active customers, or 19 percent of its total, as crypto prices dropped. The company’s net revenue in the first three months of the year shrank 27 percent from a year earlier, to $1.2 billion. Its stock price has plunged 84 percent since it went public last year.

This month, Coinbase said it would rescind job offers and extend a hiring freeze to battle the economic downturn. On Tuesday, it said it would cut about 1,100 workers.

Brian Armstrong, Coinbase’s chief executive, informed employees of the layoffs in a note on Tuesday morning, saying the company “grew too quickly” as crypto products became popular.

“It is now clear to me that we over-hired,” he wrote. A Coinbase spokesman declined to comment.

“It had been growth at all costs over the last several years,” said Ryan Coyne, who covers crypto companies and financial technology at the Mizuho Group. “It’s now turned to profitable growth.”

memo to staff, the Winklevoss twins said the industry had entered a “crypto winter.”

commercial starring the actor Matt Damon, who declared that “fortune favors the brave” as he encouraged investors to put their money in the crypto market. Last week, Crypto.com’s chief executive announced that he was laying off 5 percent of the staff, or 260 people. On Monday, BlockFi, a crypto lending operation, said it was reducing its staff by roughly 20 percent.

Gemini and BlockFi declined to comment. A Crypto.com spokesman said the company remains focused on “investing resources into product and engineering capabilities to develop world-class products.”

Cryptocurrencies have long been volatile and prone to boom-and-bust cycles. In 2013, a Chinese ban on Bitcoin sent its price tumbling. In 2017, a proliferation of companies creating and selling their own tokens led to a run-up in crypto prices, which crashed after regulators cracked down on so-called initial coin offerings.

These bubbles are built into the ecosystem, crypto enthusiasts said. They attract talented people to the industry, who go on to build valuable projects. Many of the most vocal cheerleaders encourage investors to “buy the dip,” or invest more when prices are low.

“We have been in these downward spirals before and recovered,” Mr. Jones, the Science Inc. investor, said. “We all believe in the fundamentals.”

Some of the companies have also remained defiant. During Game 5 of the N.B.A. finals on Monday night, Coinbase aired a commercial that alluded to past boom-and-bust cycles.

“Crypto is dead,” it declared. “Long live crypto.”

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How Influencers Hype Crypto, Without Disclosing Their Financial Ties

Some of the projects that Mr. Armstrong promoted were small-time, experimental crypto ventures that eventually encountered problems. In those cases, he said, he considered himself a victim, too.

“They’re preying on the novice crypto influencer who just got popular and is trying to figure out what they should and shouldn’t be doing,” he said. “It’s hard to go from 12,000 followers to a million in one year and make all the right decisions.”

Mr. Paul rose to fame as a video blogger and an occasional actor; YouTube once reprimanded him for publishing footage of a dead body he found in a Japanese forest. Over the years, he has parlayed his internet fame into an eclectic array of entrepreneurial pursuits, including a line of energy drinks.

Mr. Paul became interested in crypto last year as the market for NFTs started booming. In a recent interview, he acknowledged that he was still learning how to navigate the crypto market, even as he tried to profit from the technology. “I’m an extreme ideas person, not much of an executor,” he said.

Mr. Paul was involved in some of the initial brainstorming for the Dink Doink project. But the venture was ultimately spearheaded by one of his roommates, Jake Broido, who gave Mr. Paul 2.5 percent of the tokens that were initially issued.

In a tweet last June, Mr. Paul called it one of the “dumbest, most ridiculous” cryptocurrencies he had encountered, and circulated a video of a cartoon character singing sexually explicit lyrics. “That’s why I’m all in,” he added. He also appeared in a shaky-cam video on Telegram in which he hailed Dink Doink as possibly his favorite crypto investment.

The campaign was a flop, and Mr. Paul was pilloried by YouTube critics. The price of Dink Doink hovered well below a cent, before falling even further in value over the summer. Mr. Paul said he had never sold his tokens or profited from the project. But he said he regretted promoting the coin without disclosing his financial stake. “I definitely didn’t act as responsibly as I should have,” he said.

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Sam Bankman-Fried, Crypto Billionaire, Wants Washington to Follow His Lead

Mr. Bankman-Fried spent much of Crypto Bahamas shuttling back and forth from his laptop to the convention stage. Even his mother, Barbara Fried, had trouble getting time alone with him: As she tried to catch his eye one afternoon, a blockchain bro in a polo shirt cornered Mr. Bankman-Fried, asking him to film a birthday message for a friend. A few minutes later, he was backstage, shaking hands with Tony Blair and making awkward small talk about Brexit.

Unlike some crypto conferences, the gathering in the Bahamas was an invitation-only affair, and it drew a high-rolling crowd. As a party favor, FTX’s guests were offered discounts at a private jet company. On the bus ride to a beachside party, one attendee talked up his crypto yacht collective — “the most exclusive club that’s the most inclusive once you’re in.”

In places like Puerto Rico, the arrival of crypto millionaires chasing tax breaks has sent housing prices skyrocketing, outraging longtime residents. But the political leadership of the Bahamas has welcomed FTX with open arms. Prime Minister Philip Davis began the first day of conference programming with an enthusiastic speech, declaring that crypto entrepreneurs are “better wired for innovation and change than most people on the planet.” Later, in an interview, Mr. Davis said he’d been pleasantly surprised when Mr. Bankman-Fried wore a suit to a meeting at his office. “We want you here,” Mr. Davis recalled telling him.

Mr. Bankman-Fried skipped most of the conference festivities, but he didn’t neglect his hosting duties. He had dinner with Mr. Blair and Mr. Clinton, and rarely turned down a selfie. He also made plenty of time for Mr. Scaramucci, the chairman of SALT, a corporate events organization that helped put on the conference.

SBF’s double act with the Mooch marked the end of Crypto Bahamas. Back in the green room, FTX staffers exchanged hugs and high fives. Mr. Bankman-Fried was scrolling on his phone. He stretched and ran his hands through his hair. Then he checked his watch. The comedy bit had taken about four minutes. “I’ve got a lot of emails to catch up on,” he said.

Outside, the convention center was emptying, as hundreds of crypto enthusiasts headed for the airport. It was the calm before the coming meltdown. To leave the resort, guests had to walk through the Baha Mar casino, the largest in the Caribbean, a brightly lit hall of flashing slot machines.

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

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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Bitcoin Is Increasingly Acting Like Just Another Tech Stock

SAN FRANCISCO — Bitcoin was conceived more than a decade ago as “digital gold,” a long-term store of value that would resist broader economic trends and provide a hedge against inflation.

But Bitcoin’s crashing price over the last month shows that vision is a long way from reality. Instead, traders are increasingly treating the cryptocurrency like just another speculative tech investment.

Since the start of this year, Bitcoin’s price movement has closely mirrored that of the Nasdaq, a benchmark that’s heavily weighted toward technology stocks, according to an analysis by the data firm Arcane Research. That means that as Bitcoin’s price dropped more than 25 percent over the last month, to under $30,000 on Wednesday — less than half its November peak — the plunge came in near lock step with a broader collapse of tech stocks as investors grappled with higher interest rates and the war in Ukraine.

The growing correlation helps explain why those who bought the cryptocurrency last year, hoping it would grow more valuable, have seen their investment crater. And while Bitcoin has always been volatile, its increasing resemblance to risky tech stocks starkly shows that its promise as a transformative asset remains unfulfilled.

institutional investors like hedge funds, endowments and family offices that have poured money into the cryptocurrency market.

declining revenue and a loss of $430 million in the first quarter. The company’s stock has fallen more than 75 percent overall this year.

The Nasdaq is already in bear-market territory, having ended Wednesday down 29 percent from its mid-November record. November was also when Bitcoin’s price hit a peak of nearly $70,000. The crash has been a reality check for Bitcoin evangelists.

Ukrainian counteroffensive near Kharkiv appears to have contributed to sharply reduced Russian shelling in the eastern city. But Moscow’s forces are making advances along other parts of the front line.

Bitcoin has rebounded from major losses before, and its long-term growth remains impressive. Before the pandemic boom in crypto prices, its value hovered well below $10,000. True believers, who call themselves Bitcoin maximalists, remain adamant that the cryptocurrency will eventually break from its correlation with risk assets.

Michael Saylor, the chief executive of the business-intelligence company MicroStrategy, has spent billions of his firm’s money on Bitcoin, building up a stockpile of more than 125,000 coins. As the price of Bitcoin has cratered, the company’s stock has dropped roughly 75 percent since November.

In an email, Mr. Saylor blamed the crash on “traders and technocrats” who don’t appreciate Bitcoin’s long-term potential to transform the global financial system.

“In the near term, the market will be dominated by those with less appreciation of the virtues of Bitcoin,” he said. “Over the long term, the maximalists will be proven correct, because billions of people need this solution, and awareness is spreading to millions more each month.”

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European Green Energy Firms Often Fall Short on Financing

LONDON — When Jakob Bitner was 7, he left Russia for Germany with his parents and sister. Twenty-eight years later, he is set on solving a vexing green-energy problem that could help Germany end its dependence on imported energy from Russia, or anywhere.

The problem: how to make wind and solar energy available 24 hours a day, seven days a week, even if the sun is not shining or the wind not blowing.

The company that Mr. Bitner co-founded in Munich in 2016, VoltStorage, found some success selling storage battery packs for solar power to homeowners in Europe. Now the company is developing much larger batteries — each about the size of a shipping container — based on a chemical process that can store and discharge electricity over days, not just hours like today’s most popular battery technology.

These ambitions to overcome the unreliable nature of renewable energy fit perfectly with Europe’s targets to reduce dependence on fossil fuels. But Mr. Bitner’s company is facing a frustrating reality that threatens to undercut Europe’s plans and poses a wider challenge in the global fight against climate change: a lack of money to finish the job.

plenty of capital available globally for the multitrillion-dollar task of funding this transition to greener energy.

The war in Ukraine has made Europe’s energy transition even more urgent. The European Union has said it will cut imported Russian natural gas by two-thirds this year and completely by the end of the decade. While some of that supply will be made up by imports from other countries, such as the United States and Qatar, expanding domestic renewable energy capacity is a critical pillar to this plan.

But attracting investors to projects trying to move beyond mature technologies like solar and wind power is tough. Venture capitalists, once cheerleaders of green energy, are more infatuated with cryptocurrencies and start-ups that deliver groceries and beer within minutes. Many investors are put off by capital-intensive investments. And governments have further muddied the water with inconsistent policies that undermine their bold pledges to reduce carbon emissions.

Tony Fadell, who spent most of his career trying to turn emerging technologies into mainstream products as an executive at Apple and founder of Nest, said that even as the world faced the risks of climate change, money was flooding into less urgent developments in cryptocurrency, the so-called metaverse and the digital art collections sold as NFTs. Last year, venture capitalists invested $11.9 billion in renewable energy globally, compared with $30.1 billion in cryptocurrency and blockchain, according to PitchBook.

Of the $106 billion invested by venture capitalists in European start-ups last year, just 4 percent went into energy investments, according to PitchBook.

“We need to get real,” said Mr. Fadell, who now lives in Paris and has proposed ideas on energy policy to the French government. “Too many people are investing in the things that are not going to fix our existential problems. They are just investing in fast money.”

It has not helped that the industry has been burned before by a green tech boom. About 15 years ago, environmentally conscious start-ups were seen as the next big thing in Silicon Valley. One of the premier venture capital firms, Kleiner Perkins Caufield & Byers, made former Vice President Al Gore a partner and pledged that clean energy would eventually make up at least a third of its total investments.Instead, Kleiner became a cautionary tale about the risks of investing in energy-related companies as the firm missed out on early backing of social media companies like Facebook and Twitter.

There is evidence that these old fears are receding. Two years ago 360 Capital, a venture capital firm based in Paris and Milan dealing in early-stage investment, introduced a dedicated fund investing in clean energy and sustainability companies. The firm is now planning to open up the fund to more investors, expanding it to €150 million from a €30 million fund.

There are a growing number of dedicated funds for energy investments. But even then there is a tendency for the companies in them to be software developers, deemed less risky than builders of larger-scale energy projects. Four of the seven companies backed by 360 Capital’s new fund are artificial intelligence companies and software providers.

Still, the situation has changed completely since the company’s first major green-energy investment in 2008, Fausto Boni, the firm’s founder, said. “We see potentially lots of money coming into the sector, and so many of the issues we had 15 years ago are on their way to being overcome,” he said. But the availability of bigger investments needed to help companies expand in Europe still lags behind, he added.

Breakthrough Energy Catalyst, which is backed by Bill Gates, is trying to fill the gap. It was formed in late 2021 to help move promising technology from development to commercial use. In Europe, it is a $1 billion initiative with the European Commission and European Investment Bank to support four types of technologies — long-duration energy storage, clean hydrogen, sustainable aviation fuels and direct air capture of carbon dioxide — that it believes need to scale quickly.

In Europe, there are “significant difficulties with the scaling-up phase,” said Ann Mettler, the vice president for Europe at Breakthrough Energy and a former director general at the European Commission. There is money for start-ups, but when companies become reasonably successful and a bit larger, they are often acquired by American or Chinese companies, she said. This leaves fewer independent companies in Europe focused on the energy problems they set out to solve.

Companies that build complex — and often expensive — hardware, like Mr. Bitner’s batteries for long-duration energy storage, have an especially hard time finding investors willing to stomach the risks. After a few investment rounds, the companies are too big for early-stage investors but too small to appeal to institutional investors looking for safer places to park large amounts of cash.

“If you look at typical climate technologies, such as wind and solar and even the lithium-ion batteries, they took well over four decades to go from the early R&D to the large-scale commercialization and cost competitiveness,” Ms. Mettler said, referring to research and development. “Four decades — which obviously we don’t have.”

There are some signs of improvement, including more funds focused on clean energy or sustainability and more companies securing larger investment rounds. But there is a sense of frustration as investors, companies and European governments agree that innovation and adoption of new technology need to happen much more quickly to reduce carbon emissions sharply by 2030.

“You won’t find a place in the world that is more attuned to what is needed than Europe,” Ms. Mettler said. “It’s not for lack of ambition or vision — it’s difficult.”

But investors say government policy can help them more. Despite climate pledges, the regulations and laws in place haven’t created strong enough incentives for investments in new technologies.

Industries like steel and concrete have to be forced to adopt greener methods of production, Mr. Boni, the 360 Capital founder, said.

For energy storage, hydrogen, nuclear power and other large-scale projects, the government should expedite permitting, cut taxes and provide matching funds, said Mr. Fadell, who has put his personal fortune into Future Shape, which backs start-ups addressing societal challenges.

“There are few investors willing to go all in to put up $200 million or $300 million,” Mr. Fadell said. “We need to know the government is on our side.”

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Crypto Industry Helps Write, and Pass, Its Own Agenda in State Capitols

In July, the state ordered a dozen A.T.M. providers that sell crypto in exchange for cash — including Cash Cloud, Coin Now and DigiCash — to register as money transmitters, despite appeals from the companies, documents obtained by The Times show.

Last year, Mr. Aloupis introduced the bill to exempt two-party crypto transactions, after lobbying appeals by Mr. Armes and a trade group he leads, the Florida Blockchain Business Association. (Its members include Binance, the large crypto exchange.) The bill failed to win Senate approval, and it was reintroduced for this year’s session.

Russell Weigel, the Florida commissioner of the Office of Financial Regulation, said he endorsed the legislation that Mr. Armes had championed.

“If I go and buy groceries at your food store, that’s a two-party transaction,” Mr. Weigel said. “Do I need a license for that? It seems absurd.”

Lobbyists for Blockchain.com, a cryptocurrency exchange that moved last year from New York to Miami, and Bit5ive, which manufactures crypto mining equipment in the Florida area, joined the effort, contacting dozens of state lawmakers.

“They are very pro crypto,” Robert Collazo, the Bit5ive chief executive, said of Florida lawmakers.

In the future, the company plans to raise money for crypto-friendly legislators in Florida, said Michael Kesti, Bit5ive’s lobbyist. The legislative affairs director of the Florida blockchain association, Jason Holloway, is already running for the State House, with donations — some in cryptocurrency — from Mr. Armes and others.

“I don’t want it to seem like we are paying for the influence,” Mr. Kesti said. “But we do want to support them.”

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