Coinbase’s billionaire founders lose billions as exchanges tumble

Coinbase’s billionaire founders lose billions as exchanges tumble

It's been a long few weeks since the crowd was partying in Miami.

Brian Armstrong, founder of Coinbase Global Inc., had a personal fortune of $13.7 billion as recently as November and about $8 billion at the end of March. The market value of Coinbase, the largest U.S. criptocurrency exchange, is now only $2.2 billion, according to the Bloomberg Billionaires Index.

Since the first day of trading in April 2021, the firm's shares have plunged 84%, closing Wednesday at $53.72 after the company warned that trading volume and monthly transacting users were expected to be lower in the second quarter than in the first.

It raised questions about Coinbase's ability to withstand the decline in prices, forcing Armstrong to take to Twitter to defend the company. Armstrong, the firm's chief executive officer, said there was no risk of bankruptcy even though a black swan event occurred and users' funds are safe.

The CEO of Galaxy Digital has seen his fortune plummeted to $2.5 billion, from $8.5 billion in early November. He has been a champion of TerraUSD, the algorithmic stable coin that is now at risk of a complete collapse due to a breakdown in the price of a coin in the same ecosystem, Luna.

Novogratz said at the Bitcoins 2022 conference in Miami on April 6 that he is probably the only guy in the world with a Luna tattoo and a Bitcoin tattoo.

After a selloff started with tech stocks spilling over into digital money, billionaire cryptocurrencies fortunes that swelled over the last two years are disappearing. Since their record highs last year, the most popular criptocurrency and Ether have fallen more than 50%.

Many of the biggest losses are attributed to the founders of exchanges, where traders buy and sell digital currency, despite the fact that almost all of them have suffered wealth declines.

At least on paper, Changpeng Zhao, CEO of closely held Binance, has lost a larger fortune than Armstrong or Novogratz. He debuted on the Bloomberg wealth index in January with a net worth of $96 billion, one of the world's largest. The average enterprise value to sales multiples of Coinbase and Canadian coin firm Voyager Digital was used as a basis for the calculations, and the average enterprise value had shrunk to $11.6 billion by Wednesday.

The US appears to be experiencing a more downturn than their global competitors. Since the beginning of the year, trading volumes at Coinbase have fallen steadily, while volume on Binance saw an increase last month. The US-focused business, by comparison, experienced even steeper declines than Coinbase's.

Tyler and Cameron Winklevoss, co-founders of the rival criptocurrency exchange Gemini, have each lost about $2.2 billion - or roughly 40% of their wealth this year. The fortune of Sam Bankman- Fried, CEO of FTX, has fallen by half since the end of March to around $11.3 billion.

Armstrong isn't the only billionaire who has lost money with Coinbase. Fred Ehrsam, a former Goldman Sachs Group Inc. trader, is currently worth $1.1 billion, down more than 60% this year.

According to the company's proxy statement, Armstrong owns 16% of Coinbase and controls 59.5% of its voting shares, while Ehrsam has a 4.5% stake and controls 26% of its voting stock.

The riskiest junk-rated notes are some of the riskiest of which the bonds of the coinbase have plunged.