It Was Supposed to Be Crypto's Year. Then Came the Crash. — WSJ
By Kevin T. Dugan and Vicky Ge HuangEarlier this month, Cantor Fitzgerald Chairman Brandon Lutnick presided over an "unveiling" of Satoshi Nakamoto to close out the first day of his firm's Miami crypto conference. At least, it was a statue of the mysterious creator of bitcoin.At the Ritz-Carlton, more than 200 bankers and investors gathered to see the artwork, sculpted to resemble code out of "The Matrix." Selfies were taken. Michael Saylor looked on approvingly. A string ensemble played "New York, New York." Though the statue was sitting cross-legged with a laptop, a plaque beneath it read, confusingly, "Always Standing for Freedom."On that day, bitcoin was down about 19% since its October peak. It would fall further still, giving up all its gains for the year, and leading a $1 trillion loss in digital currencies more broadly.The crypto market turmoil only intensified this week, with bitcoin shedding more than 10% and over $10,000 in value. In the 24 hours leading up to Friday morning, more than $2 billion worth of leveraged crypto trades were liquidated, pushing bitcoin below $81,000, according to data from CoinGlass. The largest cryptocurrency is now on track for its worst monthly performance since June 2022, when the collapse of crypto lender Celsius Network plunged the market into what became known as its crypto winter.Some traders have said the drop in bitcoin may be forcing some other selling in the traditional markets, which swooned this week."Every group chat I'm in, everyone wants to know who blew up," said Nic Carter, founding partner at Castle Island Ventures. "You can't make sense of it all now. There's a general malaise with no exact catalyst to say this is why."This was supposed to be crypto's year. There was a perfect storm of a crypto-loving White House, Wall Street adoption and friendly legislation that put a close to more than a decade of antagonistic U.S. regulation and prosecutions.In a sense, it worked. Divisions between traditional and crypto finance seemed to blur. Portfolio managers are modeling cash flows based on the yields of stablecoins. BlackRock and Fidelity, among many others, hoovered up bitcoins for ETFs. Banks like BNY Mellon and JPMorgan Chase wanted to put funds on the blockchain, while digital token companies like Ripple tried to become banks."Gateways are being opened every single day," said President Trump's son, Eric Trump, who has co-founded two crypto companies. "This dam is cracking. The two were becoming one, and I think it's very exciting."That helped make bitcoin trading less volatile than it used to be."Once institutions are involved, it starts to trade like an institutional asset," said Cory Klippsten, CEO of bitcoin exchange Swan Bitcoin.The Trump family's sprawling crypto business would grow to be worth billions, the Journal has reported. The annual bitcoin conference in May, once Ground Zero for libertarian fringe types, went full-on MAGA. Saylor, whose company Strategy levered bets on the assets, lobbied Vice President JD Vance in Las Vegas.While critics complained of conflicts, the industry's leaders took them as a green light."That conflict of interest, that's an argument that an opposing side is naturally going to make. I would make the argument that it's a positive, " Brock Pierce, a longtime crypto entrepreneur, said in a recent interview. "I want my leaders to actually know what they're talking about, actually having built things."But the sky-high expectations of a golden age have tumbled down to earth. Despite all the banks and federal officials giving digital assets their blessing, crypto's provenance as an antiestablishment asset, born out of institutional distrust stemming from the 2008-2009 financial crisis, has been hard to shake."When Trump got elected, we were saying 'gosh, finally we're going to get all the institutions, ETF approvals, pretty much all the headlines that we dreamed of in crypto,'" said Santiago Roel Santos, a longtime crypto investor and chief executive of Inversion. "The market just has not reacted the way that you would have thought."Instead crypto continues to struggle to break free of its reputation as the deranged, foul-mouthed little sibling of Wall Street, too volatile to trust, too entertaining to look away. Jamie Dimon, ever the mouthpiece for traditional finance, maligned the industry as a fraud, a Ponzi scheme and a collection Pet Rocks, among other colorful descriptors. The many attempts to go legit met with predictable ends. (See: Sam Bankman-Fried).This year has included new chapters from its Wild West. Meme coins spawned on sites like Pump.fun, where the awful and the brainless alike became speculative fodder. One investor was allegedly kidnapped in the West Village. Another lost fingers in France.Throughout the summer, traders increased their leverage to crypto, only to get caught off-guard by the risks from the real-world economy. On Oct. 10, Trump's surprise tariff announcement against China triggered a selloff that forced exchanges to liquidate over $19 billion worth of trades. The shock waves from the crash continue to push bitcoin prices lower.Bitcoin's recent declines have dragged down the shares of the so-called crypto treasury companies, which sell stock or debt to fund their token acquisitions. Strategy, which pioneered the business model, has seen its market cap more than halved to about $50 billion from a peak of $128 billion in July.The selloff also soured sentiment toward crypto exchange-traded funds. Investors have sold around $4 billion of bitcoin and ether ETFs from issuers including BlackRock and Fidelity Investments in November, according to JPMorgan data."The truth is this hangover trend started months ago," said Thomas Perfumo, global economist for crypto exchange Kraken, in a note.Despite the sudden downturn, some in the crypto industry don't feel the need to rein it in. MoonPay, a crypto payments company, held a private dinner in the back room of Torrisi, a chic SoHo restaurant, to celebrate a partnership with Dorsia, an app for restaurant reservations.Around the time bitcoin fell to about $86,000 on Thursday — the lowest since May — Keith Grossman, MoonPay's president, was at a doctor's office in Manhattan, where he was diagnosed with kidney stones."I was more frustrated by my current kidney stone situation than by the crypto markets," Grossman said. "Crypto kills nerves. If you're in crypto long enough, none of this stuff phases you."Write to Kevin T. Dugan at [email protected] and Vicky Ge Huang at [email protected]