Big bang! Loss of 1,359.7 billion yuan, another "wealth creation myth" shattered

7×24-hour global uninterrupted trading, no price limit, fluctuations of thousands of dollars, participants’ trading levels are uneven, and endless speculation?

In 2022, Bitcoin suffered a cliff-like decline, and other virtual currencies were almost wiped out.

In just one year, the currency circle has undergone tremendous changes. Behind the shattering of the "myth of wealth creation", some trading platforms have collapsed, and some loan companies have gone bankrupt? Risks have been transmitted to everyone in the "currency circle" industry chain. link. Many investors have experienced the excitement of a "roller coaster", only to be trapped in deep losses and unable to extricate themselves.

Liquidation text messages kept ringing late at night

Since November last year, the virtual currency market has ushered in a long "cold winter" amid the collapse of Bitcoin. In the eyes of many investors, it is still unknown when the currency circle will end the bear market.

"If I could start my life over again, I would definitely not choose to enter the currency circle." Looking back on his experiences in the past year, currency circle user Lin Hai is full of heavy regrets.

CoinMarketCap data shows that after reaching the highest point of the year at $47,343 on January 2 this year, the price of Bitcoin has been falling. As of December 17, Bitcoin was temporarily trading at $17,034, the lowest level since December 2020. The price has fallen by more than 64% since the beginning of this year.

Among them, in May this year, Bitcoin evaporated by more than $10,000 in just a few days. This earthquake started with the flash crash of the "Coin Circle Moutai" LUNA coin.

On May 9, Beijing time, the virtual currency LUNA coin, which once had a market value of US$41 billion and was sought after by hundreds of thousands of people overseas, suddenly plummeted continuously without warning. In just a few days, the price dropped from nearly $90 to less than $0.00015. Tens of billions of dollars in market value were wiped out, causing countless investors to lose their money and causing the currency circle to plummet by thousands of coins.

From the early morning of May 10th, the scene that investors in the currency circle feared most appeared. The liquidation text messages on the mobile phone continued. Bitcoin plummeted by more than 10% in 15 minutes, which directly led to a 20-fold long position. Investors in the contract were liquidated during the session. In currency circle gathering places such as Weibo and Telegram groups, the words "blood loss" and "rights protection" continue to emerge over time, and live crashes are also being staged.

Hodder stayed awake that night, his mind occupied with the disappearing money. After trying to convince his wife to invest all his savings of $1.2 million in virtual currencies, he lost 98%. This is just the tip of the iceberg of ruined fortunes. Data from the currency industry shows that on the 14th Beijing time alone, more than 160,000 users of virtual currency contracts across the entire network liquidated their positions, with the liquidation amount reaching 2.12 billion yuan.

Glassnode data shows that global Bitcoin investors will suffer a total loss of US$195 billion (approximately RMB 1,359.7 billion) in 2022. This means that most holders sold their Bitcoins in a “cutting” manner. The months with the most losses are February, May, June and November.

With the collapse of market confidence, virtual currency market transactions have ebbed, and a large number of virtual currencies have become “zombie coins” that no one cares about.

Data from Nomics, a virtual currency data provider, shows that the continued downturn in the virtual currency market in 2022 has led to the number of "zombie virtual currencies" (virtual currencies that have not been traded for a month) reaching 12,100. In 2018, only 136 virtual currencies became "zombie"; in 2019, there were 766, which is far lower than this year's level.

At the same time, the total currency value and trading volume of the virtual currency market continue to decline. It is foreseeable that the regulatory crackdown on virtual currencies and related speculation activities will not be relaxed in the future. Sources close to the regulator revealed that regulators are currently monitoring activities such as virtual currency issuance and “mining” and recommend that users increase their awareness of risk prevention and stay away from such speculative activities.

Well-known institutions embarked on the path of bankruptcy and liquidation

Since the beginning of this year, the currency circle has been "thundering" and continuing to stage super storms. Since the collapse of LUNA currency, many financial institutions have been exposed to be unable to redeem user assets, and many well-known institutions, including hedge fund Three Arrows Capital, have gone bankrupt and liquidated.

Celsius, the world’s largest virtual currency lending platform, is in deep bankruptcy crisis. Celsius disclosed in early July that its bankruptcy gap was as high as US$1.2 billion, with liabilities of US$5.5 billion and assets of only US$4.3 billion.

And as much as $4.7 billion of the liabilities belong to savers.

Exchanges such as AEX (An Yin) and Hoo (Hoo), the long-established trading platforms in the currency circle, have issued announcements announcing the suspension of deposits, withdrawals, and trading functions. Most of the reasons for cessation of trading services are due to drastic changes in market conditions, and problems have arisen one after another in external investment institutions, public chains, lending projects and platforms, resulting in gaps in cash flow.

Glassnode analysis pointed out that since this year, the number of active Bitcoin transaction addresses has continued to decline. Cryptocurrency markets have entered a phase consistent with the deepest and darkest bear market cycles of the past, and on-chain trading volume fundamentals are deteriorating further. Historically, this phase takes approximately 8-24 months to pass as the market finally bottoms out.

Large-scale layoffs in the currency circle

Most of the leading companies in the virtual currency industry are reducing expenditures and laying off employees to survive the "cold winter."

Coinbase, the largest virtual currency exchange in the United States, announced a restructuring plan in June to lay off about 1,000 people, accounting for nearly 20% of its total employees. The reasons were concerns about the coming economic recession and the “crypto currency market winter.” In early November, Coinbase laid off more than 60 employees again.

Many virtual currency investment institutions have recently announced large-scale layoffs, including virtual currency lending platform BlockFi, virtual currency trading platform Crypto.com, Gemini, and Argentina-based trading platform Buenbit. Among them, Buenbit has Laying off 45% of employees in May.

According to CoinDesk statistics, as of November 30, the virtual currency industry has lost more than 26,000 jobs.

The net worth of the top five tycoons in the currency circle has shrunk by US$112.7 billion

The slump in the virtual currency market has also caused the net worth of the top tycoons in the currency circle to shrink accordingly.

According to the Bloomberg Billionaires Index, as of December 17, this year, Binance Exchange founder Changpeng Zhao, FTX Exchange founder Sam Bankman-Fried (SBF), Coinbase Exchange’s Brian Armstrong, etc. The combined wealth of five cryptocurrency billionaires has shrunk by $112.7 billion.

Among them, Zhao Changpeng, who was once the "richest man in China" last year, had a net worth of approximately US$96.5 billion a year ago. His current net worth is US$14.6 billion, with a loss of nearly US$82 billion. According to the Bloomberg Billionaires Index, Zhao Changpeng's wealth evaporation ranks first among all rich people this year, exceeding the combined wealth decline of Mark Zuckerberg and Bill Gates.

FTX co-founders SBF and Gary Wang’s wealth has shrunk by nearly $25 billion, Coinbase CEO Brian Armstrong’s wealth has shrunk by $4.7 billion, and Ripple co-founder Chris Larsen’s wealth has shrunk by $1.3 billion in 2022.

(Investors in this article are pseudonyms)