Crypto Crash Widens a Divide: ‘Those With Money Will End Up Being Fine’

ENGLEWOOD, Colo. — The cryptocurrency market was in ruins. But Tyler and Cameron Winklevoss were jamming.

The billionaire twins, best known for their supporting role in the creation of Facebook, twirled and shimmied across the stage with their new cover band, Mars Junction, at a concert venue outside Denver last week, the latest stop on a coast-to-coast tour. They belted out hits like the Killers’ “Mr. Brightside” and Journey’s “Don’t Stop Believin’.” Tickets cost $25.

The Winklevosses were moonlighting as rockers just weeks after their $7 billion company, Gemini, which offers a platform for buying and selling digital currencies, laid off 10 percent of its staff. Since early May, more than $700 billion has been wiped out in a devastating crypto crash, plunging investors into financial ruin and forcing companies like Gemini to slash costs.

“Constraint is the mother of innovation and difficult times are a forcing function for focus,” the Winklevosses, who are 40, said in a note this month about the layoffs.

Cryptocurrencies have long been held up as a vehicle for economic empowerment. Enthusiasts promote the digital coins — which are exchanged using networks of computers that verify transactions, rather than through a centralized entity like a bank — as a means for people of all backgrounds to achieve transformational wealth outside the traditional finance system.

But for all those supposedly egalitarian principles, crypto’s collapse has revealed a yawning divide: As employees of crypto companies lose their jobs and ordinary investors suffer huge losses, top executives have emerged relatively unscathed.

No crypto investor has fully escaped the downturn. But a small group of industry titans accumulated immense wealth as prices spiked over the last two years, giving them an enviable cushion. Many of them bought Bitcoin, Ether and other virtual currencies years ago, when prices were a small fraction of their current value. Some locked in their gains early, selling parts of their crypto holdings. Others run publicly traded crypto companies and cashed out of their stock or invested in real estate.

By contrast, many amateur traders flooded into the crypto market during the pandemic, when prices had already started soaring. Some poured in their life savings, leaving them vulnerable to a crash. Thousands also flocked to work for crypto companies, thinking it was a ticket to new riches. Now many of them have seen their savings vanish or have lost their jobs.

The fallout from the crypto crash follows the pattern of other financial downturns, said Todd Phillips, the director of financial regulation and corporate governance at the Center for American Progress, a liberal think tank.

“No matter what, those with money will end up being fine,” he said.

The combined fortunes of the 16 richest crypto billionaires exceeded $135 billion in March, Forbes estimated. As of this week, the total was about $76 billion, but most of the loss was suffered by a single billionaire, Changpeng Zhao, the chief executive of the crypto exchange Binance, whose $65 billion fortune shrank to $17.4 billion.

Cameron and Tyler Winklevoss, whose wealth stood at $4 billion apiece before the crash, were each worth $3.3 billion this week, according to Forbes. They declined to comment.

For retail investors like Ben Thompson, 33, the reality is different. Mr. Thompson, who lives in Sydney, Australia, lost about $45,000 — half his savings — in the crash. He had dabbled in crypto since 2018 and planned to use the money to open a brewery.

“A lot of people who seemed quite reputable had a lot of confidence,” Mr. Thompson said. “The smaller people get taken advantage of.”