A bear market is when the price of an asset, such as a stock or stock index falls by 20% or more from its most recent high. Bear markets often take place after periods of rising stocks that go above expectations and then correct — a stock market correction.
The average length of a bear market is 289 days or about 9.6 months. That’s significantly shorter than the average length of a bull market, which is 991 days or 2.7 years. Every 3.6 years, the long-term average frequency between bear markets. For example, there have been five bear markets since 1900 and three since 1925, with an average time between them of about six years and nine months. Bear markets have lasted only 1% of the time that bull markets have occurred since 1950.
- The 2022 bear market has caused billions of dollars in net worth losses for several of the richest crypto founders
- The Forbes 400 rich list has four crypto billionaires this year compared to seven in 2021
- According to the report, their combined wealth fell from $55.1 billion to $27.3 billion
There are fewer and fewer crypto billionaires. Ethereum co-founder Vitalik Buterin, who revealed in May that he was no longer a billionaire, spoke for many crypto billionaires. The 2022 bear market, or “crypto winter,” has cost many of the wealthiest founders billions of dollars.
In 2021, there were seven crypto billionaires on the Forbes 400 list of the richest people in the U.S., but this year there are four. According to the report, their combined wealth fell from $55.1 billion to $27.3 billion.
Following the collapse of the Terra blockchain in May, cryptocurrency holdings have been hard hit by a sharp decline in prices. The price of Bitcoin (BTC) has fallen more than 70% from its record high of $69,000 in November 2021.
Bitcoin was the only cryptocurrency of significance to fall alongside it. The price of Ethereum (ETH), the second-largest digital asset, has plunged 75% from its all-time high. The network includes Solana (SOL), Cardano (ADA), and Binance Coin (BNB).
As of writing, Coinmarketcap data shows that the value of all crypto assets has dropped from over $3 trillion in November to $967 billion. In some ways, this year’s bear market is unprecedented.
Several factors are at play here, including difficult macroeconomic conditions, geopolitical tensions, and dubious projects and decisions by crypto founders. According to the Bitcoin Fear and Greed Index, a tool used to track industry momentum, there is a great deal of fear in the market.
The declining fortunes of crypto billionaires
A few crypto founders and backers lost their fortunes when bitcoin dropped below $18,000 in June.
According to Forbes, Sam Bankman-Fried, the founder and CEO of crypto exchange FTX, has lost 23% of his fortune since last year. Bankman-Fried has a net worth of $17.2 billion, making him the richest person in crypto. The Forbes 400 list ranks him 41st.
This year, the 30-year-old made big moves. He donated $16 million to super PACs in April, making him one of the top donors. As part of his plans to support Democrats in the next U.S. presidential election, he plans to give between $100 million and $1 billion.
It seems that Bankman-Fried has become some sort of messiah in the crypto world. Through FTX, he loaned BlockFi $400 million in June. For up to $240 million, the troubled crypto lender could be bought outright.
One of his companies, Alameda Research, also provided a $500 million loan to bankrupt lender Voyager Digital. FTX’s cash pile of around $2 billion is encouraging Bankman-Fried to make more acquisitions, according to industry media.
Chris Larsen, Ripple’s CEO
Over the past year, Chris Larsen, co-founder, and chairman of Ripple Labs has seen his wealth fall from $6 billion to $2.8 billion. Since last year, Ripple’s XRP native token crashed by 75%, sinking the 62-year-old’s net worth.
Furthermore, ripple has been affected by its long-running legal battle with the Securities and Exchange Commission. A few days ago, it won the case. As of press time, XRP’s price has soared more than 30% to $0.4595 in the past two weeks.
Larsen remains at number 380 on Forbes’ rich list. Though he continues to engage publicly about Bitcoin, the business executive and angel investor have remained silent on the SEC lawsuit.
As Bankman-Fried’s right-hand man, Gary Wang cofounded Alameda Research and FTX. There is a $4.6 billion value attached to the 29-year-old software engineer. Forbes lists him at number 227 on its 400 richest people list.
FTX, where Wang is the chief technology officer, owns 16% of Wang’s shares. Wang worked at Google “where he formulated systems that aggregated prices for millions of flights.” While Wang has a private life, he is credited with FTX’s growth alongside Bankman-Fried.
Falling from grace
The combined worth of Coinbase Global’s Brian Armstrong, 39, and cofounder Fred Ehrsam, 34, was once $15 billion. The firm’s shares have plunged 80% since its IPO in April last year, lowering their fortunes to $2.7 billion and $1.1 billion, respectively.
Despite maintaining his position at number 388 on the Forbes 400 rich list, Armstrong’s fortune may have declined the most. He was worth $11.5 billion last year at this time. The worth of Ehrsam, who left Coinbase in 2017, dropped from $3.5 billion to $2 billion.
Coinbase, the largest crypto exchange in the United States, has been hit hard by the bear market. The quarterly trading volume almost halved to $277 billion during the fourth quarter of 2021. Fees on trades are how the exchange makes money.
A recession could cause a prolonged bear market, which coinbase cited as a reason to lay off 18% of its workforce in June. At the time, Armstrong said, “We grew too quickly.”.
We cannot effectively manage this uncertain market with our high employee costs. As a result of the actions we are taking today, we will be able to more confidently deal with this period, even if it is severely prolonged.”
From $4.3 billion each, Cameron and Tyler Winklevoss’ fortunes fell to $2.2 billion each. As the markets crash, the 40-year-old twin founders of cryptocurrency exchange Gemini have turned to music. Mars Junction, their rock band, has toured.
There has been a drop in both of their rankings on the Forbes 400 rich list. As a result of unfavorable market conditions, Gemini announced in June that it would cut around 10% of its product line.
Will crypto billionaires be able to recover their wealth?
Some crypto tycoons remain billionaires without being listed on the Forbes 400 list of the wealthiest. Fortress Investment Group’s Mike Novogratz and Binance’s Changpeng Zhao have lost billions in the market downturn.
The digital markets spectrum, however, is not devoid of bear markets. Therefore, crypto enthusiasts maintain that the current events are only temporary – just as they remain hopeful that things will improve soon.
Ethereum founder Buterin has previously said that he would welcome lower crypto prices. Bloomberg News reported in February: “People deep into crypto, and especially those building things, welcome a bear market.”
According to Fred Ehrsam, a Coinbase board member and cofounder, it takes years, often decades, for new infrastructure-level technology to become mainstream.
Their investments are long-term, according to the Winklevoss twins. Cameron Winklevoss wrote on Twitter in May, “Holding for the long haul is the key.”
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