Crypto crash: a failed Kiwi crypto, a portfolio fallen 90%, and risk of layoffs

James Rohloff​ is well acquainted with the perils of the crypto market.

During the gold rush of 2021 he helped launch a coin that had a brief time in the sun, jumping 300% in value, before collapsing to be worth a tenth of a cent.

His personal crypto portfolio also boomed in value last year, but is now worth just 10% of what it was at the peak.

He has a simple method of dealing with the current downturn, which has so far resulted in some of the world’s largest crypto exchanges laying off hundreds of staff , lenders freeze transactions, and the value of bitcoin falling over 70%​.

“It’s best to just not look at it, because it doesn’t feel that great,” he says.

READ MORE:
* Wall Street: Bitcoin price falls sharply, value cut in half since November
* 90 per cent of bitcoin’s supply has been mined and four other crypto updates you should know
* Chris Dixon and Packy McCormick on the future of crypto

Rohloff will not say exactly how much the crypto crash has cost him personally, but says if he could have sold at the market peak, he would have made enough profit to buy a nice car.

He lives by the rule of only investing what he can afford to lose. He invested a modest amount each week, and he had the advantage of buying early, so despite his portfolio falling 90%, it’s only worth about 10% to 15% less than it was when he first invested​.

Like many of the converted, he believes it is all part of the ebb and flow of a volatile market.

He still invests, and says now it is about timing the bottom of the market to buy more, in order to benefit from the next bull run.

A different kind of crash

Crypto crashes have happened before but Paul Quickenden​, the head of New Zealand operations for Easy Crypto, says this time is different.

It is the first time a downturn has hit at the same time as an economic one (think price inflation, rising interest rates and the spectre of a recession).

Secondly, today there are far more large institutional investors active in the market than ever before, with banks, hedge funds, and even KiwiSaver schemes investing.

Quickenden​ says the sector welcomed the influx of big investors because it made prices boom, but it means the sentiment that directs other markets now also has a strong grip on crypto.

This, he says, is a big reason cryptos are falling in line with stock markets, pension funds, and the housing market, and acting far more like a tech stock than the “safe harbour assets” advocates often claimed them to be.

Signs suggest the good times may be over for crypto exchanges. San Francisco-based exchange, Coinbase, recently announced it intended to lay off 1100 workers ​ and Crypto.com’s chief executive says the exchange will lay off 260 people​.

Quickenden says Easy Crypto is more shielded because it doesn’t operate as a classic exchange, but sits between buyers and sellers, taking a fee for brokering trades.

He says the company is not considering layoffs, but that could change.

“We are subject to the market, so I can’t say we won’t ever have to reduce our headcount,” he says.

‘Mass extinction’ event likely

Easy Crypto has seen a shift towards more people wanting to sell than buy, as people got spooked by crashing prices.

“There’s an interesting tension going on in the market, some people think it’s the end of the world, and some people think it’s the buy chance of a lifetime,” he says.

Quickenden remains positive for the long term prospects of crypto, but predicts a “mass extinction event” of what those in the industry call “shitcoins”​ – coins launched without a strong application or function.

With roughly 17,000 cryptos or tokens currently in existence, there is potentially a lot to cull.

The “frenzy” of 2021

Rohloff was the chief operations officer of a Kiwi startup that launched one of those tokens, called Unvest, a product originally aimed at allowing investors with locked-up interests in other cryptos to trade them before they vested.

In September its tokens opened for trading at 10 cents, according to Coinmarketcap.com.​

The token jumped to trade for as much as 30c quickly, but by early-January they were worth less than a cent, and then plummeted to be worth a tenth of a cent, and Coinmarketcap.com no longer tracks it.

Rohloff left Unvest to spend more time with his daughter and says it is not his place to speak about where the project has progressed to, but says it continues to operate.

Rohloff talks about a “frenzy” that happened during 2021, when it seemed every new crypto that launched on the market couldn’t lose.

“Unless you’re investing in a scam when someone’s just going to rug-pull and take all your money you really couldn’t lose on any early investment you made,” he said.

“Now obviously it’s changed a lot – it’s very different.”

Plenty of Kiwis will have concerns about the crash, with a recent Financial Markets Authority survey showing one-in-10 hold some form of crypto asset​.

But New Zealand is also home to some big players trading in crypto’s younger brother, non-fungible tokens (NFTs) – digital artworks where ownership is verified via a blockchain.

In its most recent report for the first quarter of this year, Nonfungible.com recorded the volume of sales fell by nearly 50%, and noted a marked slowdown in the volume of buyers and sellers.

Despite this, Rohloff says a lot of his more crypto-focused friends have switched to NFT investing.

“Although the initial market looks like a bloodbath I still know of people who are making something like 100-fold returns on NFT investments over the space of a couple of months,” he says.

One Kiwi NFT maker is VeVe, which sells collectible 3D sculptures of superheroes and other pop culture icons.

The company reported $40m in sales in the first 6 months of the year, and co-founder David Yu said the company had seen slight market softening, but the platform continued to release multiple drops per week.

“New user download and sign up continues as we aim for (the) mass market.”

Non-Fungible Labs is another large New Zealand NFT creator, and chief executive Alex Smeele​ still sees a bright future.

NFL’s best known for its Flufs – digital 3D bunnies that sway on-screen, and which buyers pay thousands of dollars for.

They are similar to other NFT collections which raked in thousands of dollars each, including the Bored Ape Yacht Club, and Midnight Panthers.

Some have hats, some have eye patches, some are smoking. They all have their own short backstories, there are 10,000 of them, and in the past they have attracted a partnership with US rapper Snoop Dogg.

On Opensea.io, the website where Flufs are most often sold, the asking price for a digital bunny usually sits somewhere between 3 and 4 ethereum – but the value of ethereum has also plumetted.

In November last year, ethereum was selling for over $6700. Now it’s worth about $1700.

NFL chief executive Alex Smeele​ says if buyers used ethereum they already had, then the value of a Fluf was tied to the value of the crypto.

“But many people see the decreased ethereum price as an opportunity to buy in at a lower price point, as the relative price in US/NZ dollar is lower,” he says.

“We have still had relatively strong volume and prices despite the wider market conditions. This is in part due to the strong support we have from our community.”

Smeele says a recent announcement of a partnership with Ripple, one of the largest blockchain providers in the world, has also shielded Flufs from the worst of the market downturn.

Smeele says times like these are when “projects who are building long-term value to shine through”.

“We are insulated a bit as we have focused on building a strong community who are into the game-play and the drive towards long-term utility, more than the trading aspect of NFTs.”

That long-term utility comes in the form of the metaverse.

Exactly what this looks like is unclear, but the Fluf burrows appear to be the start –digital homes for purchase, and that cost about $500 each.