Forbes - Bitcoin Correction Or Bear Market?

CRYPTO ROLLER COASTER: This week, the price of bitcoin collapsed below $40,000, taking the rest of the market with it—only to recover dramatically the next day...and tumble again.

HOW DID WE GET THERE?

After Tesla CEO Elon Musk tweeted that the electric car manufacturer would no longer accept bitcoin as a form of payment until environmental concerns were overcome, bad news just kept coming.

On Tuesday, Michael Hsu, new chief of the Office of the Comptroller of the Currency (OCC), appointed by U.S. Treasury Secretary Janet Yellen two weeks ago, called for a review of the cryptocurrency guidance issued by the regulator under his predecessor Brian Brooks. Since Brooks took office in May 2020, the OCC provided interpretive letters and guidance clarifying that banks can custody cryptocurrency and stablecoins, as well as engage in stablecoin business, while also creating a controversial Special Purpose Payments Charter for FinTech companies.

The same day, three Chinese financial industry associations announced that bank and payment institutions are largely prohibited from conducting business related to cryptocurrencies, specifically clamping down on a slew of activities, including cryptocurrency registration, trading, clearing and settlement. The guidelines, which reiterate a previous measure from 2017, also bar financial institutions from accepting or using cryptocurrencies in payments or settlements, developing digital currency exchange services and offering any such services to clients.

HOW IT HAPPENED

The markets reacted promptly. By Wednesday, bitcoin, the world’s largest cryptocurrency, briefly fell below $30,000 and continued to trade south of $40,000—the first time since early February—for a few hours before making a comeback above the key level. Other major cryptocurrencies followed suit, with ether (ETH), binance coin (BNB) and cardano (ADA) posting losses in the double-digits.

As a result, more than 700,000 futures traders liquidated their positions, amounting to $8.48 billion in losses, over the 24 hours preceding late Wednesday morning, according to Bybt, a cryptocurrency futures trading and information platform. More than 50% of traders were short on cryptocurrency exchanges Binance, Bybit and Huobi, though long positions prevailed at other major marketplaces, including FTX and Deribit. Amid the selloff, Binance, Coinbase and a number of other cryptocurrency exchanges experienced outages or restricted trading.

All the while, many well-known crypto bulls expressed confidence in the long-term trajectory of the market. Additionally, CEOs of the two largest publicly traded hodlers of bitcoin, Tesla and MicroStrategy, signaled they hadn’t sold their billion-dollar stakes in the cryptocurrency. Ironically, while Tesla’s chief Elon Musk helped trigger the collapse, his firm retained its holdings. Musk communicated Tesla wasn’t selling its bitcoin through a combination of text and emojis in a tweet “Tesla has diamond hands.” Michael Saylor, founder and CEO of MicroStrategy, also announced the company had “not sold a single satoshi.”

LOST BILLIONS

By Wednesday evening, Forbes estimated that the dozen billionaires who built their fortunes in the world of cryptocurrencies had lost $15.5 billion. Their collective net worth dropped from $62.3 billion to $46.8 billion over the nine days between May 10, when bitcoin was trading at $59,423 per coin, and the day of the plunge. The biggest loser (in dollar terms) was Sam Bankman-Fried, the 29-year-old founder of quantitative crypto trading firm Alameda Research and cryptocurrency exchange FTX. Bankman-Fried was worth $16.7 billion at bitcoin’s peak on May 10, but $11.5 billion as of Wednesday afternoon. Percentage-wise, Michael Saylor carried the largest loss among the crypto billionaires of 45% over the same period—from $3.3 to $1.8 billion. Most notably, the dip took away Vitalik Buterin’s billionaire status, just weeks after he crossed the threshold. Ethereum’s co-founder became a billionaire on May 3 when ether reached nearly $3,300 per coin.

Bitcoin made a brief comeback on Thursday, trading near $40,000 for much of the day, only to tumble again on Friday, following another call from Chinese authorities signaling a crackdown on mining and trading of the cryptocurrency.

BLOCKCHAIN 50 SPOTLIGHT

America’s largest cryptocurrency exchange Coinbase has more than 56 million individual accounts in 100-plus countries and $335 billion in quarterly traded volume. Coinbase is also the first principal issuer of debit cards that allow customers to spend their cryptocurrency anywhere Visa is accepted and to withdraw cash from any ATM. On April 14, the exchange went public on Nasdaq via direct listing. As of May 21, 12:05 pm E.T, Coinbase is trading at $227 per share under the ticker symbol COIN.

ELSEWHERE

FTX set to raise up to $1 billion at $20 billion valuation: sources [The Block]

U.S. Treasury Calls for Businesses to Report Crypto Transfers of More Than $10K to the IRS [CoinDesk]

As bitcoin lurches, Wall Street plots its way into cryptoland [The Economist]

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