Cryptocurrencies are in free fall. One of the world’s largest crypto exchanges is cutting nearly a fifth of its work force. And a major crypto lender is halting all withdrawals and transactions for its customers, citing “extreme market conditions.”
Now, crypto-industry leaders are bracing for the next shoe to drop, after Celsius Network Ltd. sent the sector into a tailspin with its announcement that millions of customers would be left in limbo indefinitely.
As investors rush to exit the digital-asset market, the enthusiasm for crypto that catapulted global attention during the COVID-19 pandemic is wavering. Many crypto heavyweights, including several companies in Canada, are left to grapple with the current downturn – wondering how far crypto will fall and which firms will be hit.
One crypto bull is particularly blunt about the likelihood of more problems ahead for the industry, even as he continues to invest in it.
Kevin O’Leary believes the major dips in the market this week are just the beginning of a wider meltdown. If anything, he says the next fall for crypto will be much bigger.
“There’s not nearly enough fear and loathing with the many crypto companies out there,” Mr. O’Leary said in an interview, sitting inside an office conference room for Toronto-based Bitbuy Technologies Inc., a crypto trading platform recently acquired by Vancouver-based WonderFi Technologies Inc.
“Celsius is too small a player. They’re not going to impact much of anything for regulated crypto companies like the ones I’m affiliated with,” Mr. O’Leary said. “To make real change and maybe even get the crypto space to start working better, with regulation and with proper policy, we need to go to zero.
“A much bigger player will need to collapse completely, so that it can lead to more volatility for crypto. This is a space that has never seen that kind of volatility yet, which means it’s also never seen maturation yet either.”
On Wednesday, bitcoin touched a years-long low of US$20,000, tumbling nearly 27 per cent in a single week and by 70 per cent since its peak of US$68,000 in November last year. Other cryptocurrencies plunged further, with ether dropping to about US$1,160 – its lowest price in more than two years.
In Canada, Wealthsimple Inc., which quickly became one of the leading crypto-trading platforms in the country, said Wednesday that it is laying off 13 per cent of its work force because of “market volatility.” A day earlier, Coinbase Global Inc., one of the largest crypto exchanges in the world, announced that it will cut off 1,100 full-time jobs.
Still, also on Wednesday, WonderFi announced it will be listed on the Toronto Stock Exchange as of June 22 under the stock symbol “WNDR,” becoming the first regulated crypto marketplace to do so. On top of that, Chicago-based CoinFlip will announce on Thursday that it is launching multiple crypto ATMs in Toronto and Vancouver.
It’s the kind of dichotomy that Andreas Park, a finance professor who co-founded the University of Toronto’s blockchain research lab, said could become even more jarring in the coming years. “With crypto, when it’s good, it’s always touted as the best it could possibly be. And when it’s bad, there will still be a way to make it sound good,” he said.
Dani Lipkin, director of global business development for the Toronto Stock Exchange, said the TSX will remain bullish on crypto and blockchain companies. “We’re focused here on the long term,” Mr. Lipkin said in an interview.
“We want to support the companies we work with to get to long-term success, so we don’t necessarily look at these short-term concerns over a few months. It’s important to note, that for global investors, Canada, and very specifically the TSX, has been known as the home for blockchain- and crypto-related companies over the last number of years,” he added. ”We don’t see that changing any time soon.”
A number of crypto companies in Canada are attempting to distinguish themselves from those that are faltering or accelerating a market rout. Mr. O’Leary is quick to point out that the companies he works with are regulated by securities commissions across Canada.
Similarly, CoinFlip chief executive officer Ben Weiss separates his crypto company from others by stating that his business model is different and does not face regulatory hurdles, which he said are common for the companies that appear to be crashing.
“Recent incidents, such as the Celsius transaction freeze, illustrate that crypto lending remains a regulatory grey area,” Mr. Weiss said in an e-mail. “CoinFlip believes that crypto assets, like traditional assets, should be controlled by the investor. For this reason, our model encourages the use of self-custodial wallets, giving our customers the final say on where their assets live. … CoinFlip has also thrived throughout this ‘crypto winter.’ ”
Prof. Park said only time will tell whether regulated players in crypto are any different than others. “But what we can certainly say is that the whole idea of ‘my token is better than yours, and let’s invest in a new token so we can make easy money’ is going out the window almost entirely,” he said.
“And maybe that’s the lesson we’re all learning from this downturn.”
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