Crypto’s Onetime Fans Are Calling It Quits After FTX Collapse
Debacle is last straw for many who embraced crypto during pandemic
4 min
Buying crypto was so much fun when it was going up. Now, many onetime fans are getting out.
This year has brought crisis after crisis, raising questions about the industry’s long-term prospects. Two major lenders, Voyager Digital and Celsius Network, filed for bankruptcy this summer. The price of bitcoin has plunged some 75% from its peak late last year. For some traders, the recent collapse of the crypto exchange FTX—which is dragging down other firms—was the last straw.
Crypto fund asset managers saw investors withdraw almost $20 billion in November, or nearly 15% of total assets under management, according to the research firm CryptoCompare. That brought the fund managers’ collective AUM to its lowest point in nearly two years. By contrast, many small-time investors continue to stay in the relatively boring stock market, despite losses there as well.
Dennis Drent, a former executive at a pet-insurance company, said he waded into the crypto market last December, when the world felt very different. He was growing anxious that the stock market’s record run would soon sputter and was frustrated by how little his bond investments were generating.
Around that time, he caught an appearance by a bitcoin proponent, Michael Saylor, with Fox News’s Tucker Carlson.
“He had me convinced that you can’t lose,” said Mr. Drent, who lives in Southern California.
A few weeks later, he poured about $25,000 into Grayscale Bitcoin Trust. He even had a nod from his financial adviser, he said.
It didn’t work. Mr. Drent cashed out in May, taking about a 50% loss. By then, crypto prices were falling fast. But so were stocks and bonds, an unusual coupling that reflected broad uncertainty.
Mr. Drent said he should have known to avoid a market that was so lightly regulated and that he didn’t fully understand: “I wasn’t cautious enough.”
Mr. Saylor didn’t respond to a request for comment.
Crypto use exploded over the past few years and so did crypto prices, with bitcoin soaring from roughly $9,000 in early March 2020 to about $68,000 at its peak in November 2021.
Rookie traders stuck at home during pandemic lockdowns downloaded apps that made it easy to buy crypto with a few taps on their phones. Some embraced active trading, darting in and out of different cryptocurrencies. Others thought they were taking a safer route by parking their crypto holdings at companies that offered eye-popping yields in return.
The share of U.S. households that have ever transferred funds into a crypto-related account jumped to 13% as of June 2022, up from 3% before 2020, according to data from the JPMorgan Chase Institute. It estimates that many new investors flocked to crypto for the first time last year, with activity among new users peaking around the time bitcoin prices did in November. Since then, activity has tumbled.
While crypto prices soared, financial-services companies rolled out new products and services to allow everyday investors to add crypto to their nest eggs. Some of that enthusiasm has waned.
“New customer additions have slowed…because the trust of the industry has been damaged,” said Chris Kline, co-founder of Bitcoin IRA, which allows investors to trade crypto through retirement accounts.
Making matters worse, many people followed the herd and bought crypto only when prices rose.
JPMorgan estimates that many investors who transferred money to crypto accounts did so when prices were much higher than they are now. That means many investors are likely sitting on losses.
Of course, plenty of crypto traders say they are holding on or trying to buy the dip in cryptocurrencies. Some are doing so because they believe in crypto as a conduit to change global finance. Others just don’t need the money soon.
Stephen Jones, 28 years old, said he started buying cryptocurrencies when he was in college. Mr. Jones notched some wins but started having doubts over the past year, so he sold out of some positions. Getting married in June pushed him to take another closer look at his finances, he said.
Finally, he decided to cash out his remaining holdings in October. When he saw FTX collapse shortly afterward, he was relieved that he had already dumped his crypto.
FTX “definitely opened my eyes a little bit,” said Mr. Jones, who works in finance and is based in Houston. “I’m not really seeing as much value-added activity as was initially promised.”
Nick Torrico, 26, had about $10,000 in mainly bitcoin, Ethereum and VeChain at Voyager when it filed for bankruptcy in July, and he doesn’t know if he will see all of that money again.
After diving into cryptocurrencies a few years ago, he has pulled back on some of his trading, especially in smaller coins.
Mr. Torrico said he is glad that he has diversified his holdings and didn’t pour all of his money into crypto. He is holding more in cash in his investment account. He has made some stock trades with borrowed money and could face margin calls if shares of some of his companies fall farther.
Still, Mr. Torrico, who works in finance, said he remains optimistic about blockchain technology and expects more regulation of crypto, which he thinks will help the industry. He still holds bitcoin and ether, the two biggest cryptocurrencies, and plans to keep buying regularly.
“A lot of bad actors have been exposed,” Mr. Torrico said. “My biggest lesson is to be patient and not try to make fast money.”
—David Benoit contributed to this article.
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Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Office owners are struggling with near record-high vacancy rates
3 min
First, the good news for office landlords: A post-Labor Day bump nudged return-to-office rates in mid-September to their highest level since the onset of the pandemic.
Now the bad: Office attendance in big cities is still barely half of what it was in 2019, and company get-tough measures are proving largely ineffective at boosting that rate much higher.
Indeed, a number of forces—from the prospect of more Covid-19 cases in the fall to a weakening economy—could push the return rate into reverse, property owners and city officials say.
More than before, chief executives at blue-chip companies are stepping up efforts to fill their workspace. Facebook parent Meta Platforms, Amazon and JPMorgan Chase are among the companies that have recently vowed to get tougher on employees who don’t show up. In August, Meta told employees they could face disciplinary action if they regularly violate new workplace rules.
But these actions haven’t yet moved the national return rate needle much, and a majority of companies remain content to allow employees to work at least part-time remotely despite the tough talk.
Most employees go into offices during the middle of the week, but floors are sparsely populated on Mondays and Fridays. In Chicago, some September days had a return rate of over 66%. But it was below 30% on Fridays. In New York, it ranges from about 25% to 65%, according to Kastle Systems, which tracks security-card swipes.
Overall, the average return rate in the 10 U.S. cities tracked by Kastle Systems matched the recent high of 50.4% of 2019 levels for the week ended Sept. 20, though it slid a little below half the following week.
The disappointing return rates are another blow to office owners who are struggling with vacancy rates near record highs. The national office average vacancy rose to 19.2% last quarter, just below the historical peak of 19.3% in 1991, according to Moody’s Analytics preliminary third-quarter data.
Business leaders in New York, Detroit, Seattle, Atlanta and Houston interviewed by The Wall Street Journal said they have seen only slight improvements in sidewalk activity and attendance in office buildings since Labor Day.
“It feels a little fuller but at the margins,” said Sandy Baruah, chief executive of the Detroit Regional Chamber, a business group.
Lax enforcement of return-to-office rules is one reason employees feel they can still work from home. At a roundtable business discussion in Houston last week, only one of the 12 companies that attended said it would enforce a return-to-office policy in performance reviews.
“It was clearly a minority opinion that the others shook their heads at,” said Kris Larson, chief executive of Central Houston Inc., a group that promotes business in the city and sponsored the meeting.
Making matters worse, business leaders and city officials say they see more forces at work that could slow the return to office than those that could accelerate it.
Covid-19 cases are up and will likely increase further in the fall and winter months. “If we have to go back to distancing and mask protocols, that really breaks the office culture,” said Kathryn Wylde, head of the business group Partnership for New York City.
Many cities are contending with an increase in homelessness and crime. San Francisco, Philadelphia and Washington, D.C., which are struggling with these problems, are among the lowest return-to-office cities in the Kastle System index.
About 90% of members surveyed by the Seattle Metropolitan Chamber of Commerce said that the city couldn’t recover until homelessness and public safety problems were addressed, said Rachel Smith, chief executive. That is taken into account as companies make decisions about returning to the office and how much space they need, she added.
Cuts in government services and transportation are also taking a toll. Wait times for buses run by Houston’s Park & Ride system, one of the most widely used commuter services, have increased partly because of labor shortages, according to Larson of Central Houston.
The commute “is the remaining most significant barrier” to improving return to office, Larson said.
Some landlords say that businesses will have more leverage in enforcing return-to-office mandates if the economy weakens. There are already signs of such a shift in cities that depend heavily on the technology sector, which has been seeing slowing growth and layoffs.
But a full-fledged recession could hurt office returns if it results in widespread layoffs. “Maybe you get some relief in more employees coming back,” said Dylan Burzinski, an analyst with real-estate analytics firm Green Street. “But if there are fewer of those employees, it’s still a net negative for office.”
The sluggish return-to-office rate is leading many city and business leaders to ask the federal government for help. A group from the Great Lakes Metro Chambers Coalition recently met with elected officials in Washington, D.C., lobbying for incentives for businesses that make commitments to U.S. downtowns.
Baruah, from the Detroit chamber, was among the group. He said the chances of such legislation being passed were low. “We might have to reach crisis proportions first,” he said. “But we’re trying to lay the groundwork now.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
