Billionaire Chanpeng Zhao, founder of cryptocurrency exchange Binance, joked Tuesday that he was “poor again” after the exchange’s investments in the luna cryptocurrency plummeted from $1.6 billion just a month ago to about $2,200 this week.
In a tweet on Monday, Zhao said that Binance, the world’s largest cryptocurrency exchange, held 15 million Luna tokens. Binance received these tokens in exchange for its $3 million investment in 2018 in the Terra network on which luna is based. Its luna tokens were “never moved or sold” as of Monday, according to Zhao.
Business Insider stated that “Luna’s holdings on Binance were worth $1.6 billion in early April, when the token reached its peak price. But its recent drop saw that value drop to about $2,200 this week. The coin is trading at around $0.0001468 as of Thursday.”
Luna’s value has fallen rapidly in the last two weeks. Business Insider recalled that “her implosion of her began when her sister token, Terra, lost her peg to the US dollar two weeks ago.”
“The valuations of the two tokens are linked to each other. When the price of Terra fell, investors rushed to unload their holdings of that token in a scenario similar to a bank run. The fall of Terra, in turn, dragged down the price of Luna,” he maintained.
Binance founder’s tweet
“The freefall of the two tokens is estimated to have wiped out over $50 billion in value,” Insider reported on Sunday.
Zhao urged the Terra team to pay back its retail investors first. “To lead by example on protecting users, Binance will let this go and ask the Terra project team to compensate retail users first, Binance last, if at all,” he said in his tweet.
Despite his comments, Zhao, 45, is definitely not broke, having a net worth of about $14.8 billion as of Thursday, according to Bloomberg estimates.
Most of his wealth probably comes from his estimated 70% stake in Binance, according to Forbes.
(Illustration: Jovani Pérez)
In fact, Binance’s market value is estimated to be six times that of its closest competitor, Coinbase, Forbes reported in March. In this regard, it should be remembered that Binance entered some 14.6 billion dollars in trading fees last year, according to MarketWatch, which cites a report published by the financial services consultancy Opimas.
The dramatic fall of cryptocurrencies caused not only millionaire losses to the great powers of the markets but also a wave of mistrust on investors of all scales that, so far, does not seem to have an end. In the midst of a negative moment for all financial markets, impacted by the effects of the Russian invasion of Ukraine, the rise in commodities and a boost on global inflation, all risk assets were impacted by the rate hike arranged by the Federal Reserve. And when it came to risky investments, crypto was at the top of the list.
While technology stocks, high-yield bonds and other high-volatility assets were also hit in their prices, cryptocurrencies went further and left their promoters between uncertainty and panic. According to The Economist, “the crypto infrastructure is broken” and the crisis observed in recent days bears the stamp of the old financial collapses of yesteryear. The magnitude of the crisis is still difficult to quantify, but three factors help explain its scope.
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