The main cryptocurrency Bitcoin lost more than 80% of its value in 2018. And the crypto market, which is rigidly tied to the Bitcoin rate, could not help but respond with the same kind of decline. But Bitcoin's fall negatively affected not only the other cryptocurrencies, but also traders, holders, miners, and crypto companies. The latter were forced to cut staff and seriously slash budgets, and some even ceased their operations altogether.
And back then, in the fourth quarter of 2017, the rise in the rate of the main cryptocurrencies caused euphoria among many investors. Even those who had previously shown no interest in the crypto market gave in to the wave of general enthusiasm. The explosive growth of interest in crypto led many companies to try to play on this trend, and not without success — a huge number of hedge funds emerged, designed to make it easier for traditional investors to enter the cryptocurrency market. The number of such companies grew so quickly that in January 2018 this attracted the attention of the U.S. Securities and Exchange Commission (SEC). The regulator warned that it was closely monitoring companies that had changed their names and business models to take advantage of this growing interest in cryptocurrencies and blockchain. At the same time, the SEC began rejecting requests to create funds of this type due to gaps in regulation. In March, the SEC sent requests to cryptocurrency hedge funds for information about their methods of valuing cryptocurrency investments and their compliance with the requirements of the rules on protecting client funds. The regulator expressed concern that investors were pouring billions of dollars into cryptocurrency assets without an adequate assessment of the risks, and that some people profiting from the overheated market might be breaking the law. In this situation, according to the SEC, it is necessary to conduct a detailed audit of the activities of all crypto companies for compliance with current legislation. Since by this time the Bitcoin rate was already around $7 thousand (the lowest figure since November 2017), many investment funds simply ceased their operations, among them such as Alpha Protocol and Crowd Crypto Fund.
Genesis Mining — an Icelandic mining company, began closing unprofitable mining contracts in August 2018. Due to the decline in the bitcoin rate that began in January, some cloud mining contracts began to bring in less profit than the cost of servicing them, so the company was forced to offer users to switch to five-year premium contracts with no possibility of early termination — or to cancel them. To minimize the negative consequences for clients, the company's management made the switch to the Radiant Bitcoin Mining plan with a discount of $180 to $250 per 1 TH/s. It is important to note that Genesis Mining's actions can be characterized as lenient, since the cloud mining business is not a field that can guarantee its clients constant profit. Recall that due to a similar problem, the mining company Hashflare also announced the suspension of its mining equipment and SHA-256 contracts. The Japanese company GMO Internet, which was going to launch a cloud mining service in August 2018, reconsidered its business priorities and decided to concentrate on selling ASIC miners, while paying less attention to its own mining and cryptocurrency mining services for consumers.
Coinfloor — the oldest bitcoin exchange in the United Kingdom, was founded in 2013 and is focused on institutional investors. It also suffered greatly from the consequences of the general decline of the cryptocurrency market last year. As a result of reduced trading on the platform, the company's management was forced to restructure the company and seriously cut staff. According to the exchange's CEO, Obi Nwosu, over the past 12 months the total volume of BTC trading on the platform amounted to $1 billion, however, as of today, according to CoinMarketCap, the daily trading volume on Coinfloor is just over $400 thousand.
Giga Watt — one of the largest mining companies in the USA, formerly known as MegaBigPower, was founded in 2017 in Washington. In the summer of this year the company held an ICO, as a result of which investors invested more than $20 million in the project. In exchange for their contribution they were supposed to receive either Giga Watt tokens, granting exclusive rights to the free use of the company's capacities for 50 years, or mining equipment, which was supposed to be installed and launched by the project team. However, on November 20, 2018, Giga Watt declared bankruptcy, filing the corresponding petition with the U.S. District Court for the Eastern District of Washington. At the same time, the company, with assets of up to $50 thousand, was left owing creditors between $10 and $50 million. In addition to the crypto market crash, the company was very negatively affected by two class-action lawsuits filed against it in January and March 2018. The first was initiated by investors participating in the ICO, who accused Giga Watt of failing to comply with the agreed terms and of not returning the funds. The second lawsuit was related to an accusation of violating U.S. law — the law firm Silver Miller stated in federal court that the company had offered users unregistered securities under the guise of tokens.
Galaxy Digital — a cryptocurrency merchant bank founded by billionaire Mike Novogratz, lost $136 million in the first 9 months of 2018, and in the third quarter its realized and unrealized losses amounted to $41 million. The bank's dark streak began at the very start of last year along with the fall of the bitcoin rate. By that time, Novogratz had to contribute about $302 million to keep the bank afloat. In February, Galaxy Digital raised $250 million to finance its operations and investments. The process of regulators approving the start of official trading of the bank's shares on the Canadian exchange dragged on from January for almost half a year. According to Novogratz himself, the process of obtaining permission was "frustrating" because of the time spent. Moreover, when Galaxy Digital entered this stock exchange, the company's shares fell in price by 20% in the first half hour. In November 2018, Galaxy Digital bank reported strategic operational and organizational changes in its activities. The company decided to shift its focus from advising small ICO and blockchain projects to helping large institutional clients. To do this, it will close its Vancouver office and undertake the expansion of its New York division. At the same time, trading of Galaxy Digital shares on the TSX was suspended due to the sharp drop in their price.
Naturally, these are only some of the crypto companies that suffered from the market crash in 2018. Besides them, the payment blockchain platform SpankChain, the software developer ConsenSYS, the mining company Bitmain, and other companies that play a significant role in the crypto industry also had to seriously cut budgets and lay off some employees. However, as Ethereum co-founder and ConsenSys head Joseph Lubin said, outside observers should not draw conclusions about these companies based on the current processes: "The sky is not falling. From my point of view, the future looks very bright, and I am still full of enthusiasm regarding the scalability-related solutions available now."
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