8 The Sunday Times May 29, 2022
BUSINESS
A plunge in the prices of ever-increasing numbers of currencies exposes the weakness of the world’s promised new financial order
This time, crypto really is dead
became the first big bank last year to
allow customers to invest in bitcoin
investment vehicles.
The result: while past price shocks
hurt a small community of crypto believ-
ers, this time around a lot more have lost
out, which could set back the industry by
years. “There’s a lot more investors who
have been burned,” Dolev said.
A look back at the past year is instruct-
ive. In January 2021, there were 7,812cryptocurrencies. Today there are
10,043, says coinmarketcap.com. That
means at least 139 new currencies have
been minted every month — not counting
those that disappeared — or roughly five a
day, for a year and a half. Most have little
to no utility. Scott Minerd, chief invest-
ment officer of Guggenheim Partners,
told CNBC last week: “The majority of
these things are garbage.”
The boom coincided with the pan-
demic. In March last year, when millions
of Americans received $1,400 stimulus
cheques from the federal government,
there was a corresponding surge in Coin-
base app downloads. Aided also by pub-
licity around its float, by May Coinbase
had surged to number one in the Apple
App store ratings, beating TikTok, You-
Tube, Instagram and other apps.
Suddenly, everyone wanted to trade
crypto. And why not? Around that time,
bitcoin and ethereum, the top two cryp-
tocurrencies that together account for
more than half of the market’s total value,
were hitting new highs. Interest rates
were low. Asset prices were soaring, and
cryptocurrencies were on the crest of thewave. By April 2021, ethereum had
surged past $4,000, a twentyfold jump in
a year, and Bitcoin went above $60,000,
up by than 800 per cent in a year.
After a dip, the market peaked in
November. Cryptocurrencies hit a com-
bined value of $2.8 trillion. It has been
downhill since as the acute phase of the
pandemic faded, inflation soared, inter-
est rates began to rise and war broke out
in Ukraine. Suddenly life was more
expensive and less certain. Crypto, risky
in a world craving stability, has been bat-
tered. Its market value fell to $1.2 trillion
— or a loss of $1.6 trillion in six months.
The highest profile disaster was Terra,
a so-called stablecoin algorithmically
linked to another cryptocurrency called
Luna, which was supposed to confer sta-
bility. That proved illusory. The value of
Luna crashed this month, taking Terra
down with it, vaporising more than
$40 billion in days.
It is worth remembering that crypto-
currencies, or Web3 as the sector has
been rebranded, promise to remake not
only the web itself, but countless other
industries from art and music to banking.Fabric car rolls into the ride sharing lane
Would you ride in a car made
of fabric? You soon will, if a
British start-up has its way.
Arrival is the biggest, and
most audacious, electric
vehicle start-up you’ve never
heard of. Its $13 billion listing
on Nasdaq last year made it
the largest-ever float for a
British tech company.
This month, executives
travelled to the west coast of
America to unveil its ride-
sharing vehicle, which looks
like a black cab but with
bigger windows and a sparse
interior that, as an Arrival
employee explained, “has
less folds and creases”,
making it easier for drivers to
hose down after a night of
drunken passengers. It also
makes buses and vans.
Arrival said it “is working
closely with ride-hail drivers
to make sure the design suits
their needs.” Quite. It is adifferent kind of car. The
body panels are made not
from steel but a
polypropylene glass fibre that
starts out as a roll of fabric
before being pressed into
moulds and baked until it
hardens. Wing mirrors are
replaced by cameras that
display on an interior screen.
Those differences are just a
few that Arrival — with an
office in London and a
factory in Bicester,
Oxfordshire — says will make
it Britain’s electric vehicle
champion. As it gets ready to
start production this
summer, the stakes couldn’t
be higher.
Arrival is grappling with a
collapsing stock price,
mounting losses and the huge
challenge of implementing a
manufacturing system that
has never been tried before.
Avinash Rugoobur, itspresident, said: “We have
barely any margin for error.”
If that were not enough,
Arrival has also come under
scrutiny over the chief
executive, Denis Sverdlov.
The 43-year-old Russian
billionaire started the
company in 2015 but before
that, in 2013, served briefly as
Russia’s deputy minister of
communications.
Arrival said Sverdlov, who
served Russia’s government
for just a year, “never had a
personal relationship” with
Putin. Andrew Stephenson,
the transport minister, said
he would look into the claims.
Arrival employs 1,500 staff in
Britain. Its first factory, in
Bicester, covers about
300,000 sq ft and will be able
to pump out 10,000 vans a
year, the company said.
Arrival reckons it can set up
microfactories for as little as£40 million each. Arrival’s
make-or-break moment could
not have come at a worse
time. The company has more
than 140,000 pre-orders but
zero sales and was, as of the
last quarter, burning through
$55 million a month in cash —
leaving it with $735 million at
the end of March. At that rate,
it has just over a year before
the money runs out.
Since floating at $22 a share
last March, Arrival’s stock has
plunged more than 90 per
cent to $1.78 on Friday.
Rugoobur is confident that
Arrival will deliver. It has
overcome countless obstacles
to get to this point, he said,
but the most treacherous
territory lies ahead. “The
most unknown thing about
Arrival is just how much
we’ve already done. We’ve
got the Himalayas behind us
and Everest in front of us.”Huge price
shocks, such as
bitcoin plunging
from $69,000 to
$29,800 since
November, could
set back the
industry for yearsILLUSTRATION: JAMES COWENSEASON FOUR OF
DANNY IN THE VALLEYARRIVAL’S AVINASH
RUGOOBUR:
‘NO ONE HAS
EVER MADE
VEHICLES
THIS WAY
THESUNDAYTIMES.CO.UK/DANNYINTHEVALLEYS AVINASH
R:
AS
E
minted in their thousands at the height of
the boom, do not, and will not, serve a
purpose. They were ill-conceived experi-
ments or blatant money-grabs. Last year
people were swindled out of at least
$8 billion in scams or “rug-pulls”, where
a person spins up a project, sells coins to
fund it, then disappears with the money.
Indeed, even bitcoin, the progenitor of
the Web3 movement, has failed to live up
to its original purpose as a, “peer-to-peer
electronic cash system”. Those who have
bet big are feeling the pain. Nayib Bukele,
president of El Salvador, was the first
world leader last year to make bitcoin
legal tender. As the price has plunged, he
has “bought the dip”, excitedly tweeting
about the latest purchase of the asset,
with taxpayer money. Market experts
reckon El Salvador, a poor country where
a quarter of the population lives in pov-
erty, has lost $40 million and counting.
Fitch, the credit agency, cited its bit-
coin bet this year when downgrading its
credit further into junk status. The Inter-
national Monetary Fund has pleaded
with him to stop spending the nation’s
limited resources on the currency.
Bukele is unbowed. This month he
tweeted mock-ups of “bitcoin city”, a
crypto utopia he plans to fund with a bit-
coin bond that has stalled with the price
collapse. Yet for the believers, this is a
culling that will drive out the scammers
and let them get back to quietly building,
“the next generation of the internet”.
Last week, venture capital firm
Andreessen Horowitz announced a $4.5
billion fund — the world’s largest dedi-
cated to crypto. Chris Dixon,
Andreesen’s crypto chief, wrote:
“Golden eras are when legendary teams
are formed, big ideas are hatched, and
great products get built. We think we are
now entering the golden era of Web3.”
It may be, even if for most punters, it
does not feel that way.A
merica’s biggest cryptocur-
rency exchange, Coinbase,
began running a primetime
television ad in the past fort-
night featuring a single
tweet: “Crypto is dead”.
The statement remained
in the centre of the screen as
the authors changed and the
dates scrolled backward,
from this month to March 2020 to Sep-
tember 2017, April 2013 and August 2012.
Amid a $1.6 trillion (£1.2 trillion) collapse
in the price of bitcoin, ether and thou-
sands of other cryptocurrencies, the not-
so-subtle message was clear: don’t panic,
we have been here before.
The message was a bit ironic, of course
— Coinbase investors are running for
their lives. The company pulled off an
epic $85 billion stock market float last
April. But from its high of $357 a share in
November, the stock has collapsed by 80
per cent. Losses have soared. Coinbase
has shed more than two million active
users, slowed hiring and implemented a
cost-cutting plan to stem the bleeding.
Dan Dolev, an analyst at Mizuho in
New York, said the company, which
earns money from trading fees, is “unsus-
tainable”. He added: “It made me feel a
little sorry that is what Coinbase has to
do. To show this historical precedent as a
predictor of the future, as if they know.
Crypto is only fun when it goes up. It
stops being fun as it starts coming down,
and that’s what you are seeing now.”
A defining characteristic of cryptocur-
rencies since bitcoin came into being in
2009 is their volatility. What is different
about the current market rout — the price
of bitcoin has plunged 60 per cent since
November from $69,000 to $29,800 — is
that in the pandemic run-up, cryptocur-
rencies broke through.
El Salvador became the first country
last year to adopt bitcoin as legal tender.
Cities such as Miami and New York cre-
ated their own digital currencies. The
number of people who owned cryptocur-
rency in America surged to 16 per cent,
up from 1 per cent in 2015. In Britain,
more than 2.3 million adults owned
crypto assets by January 2021, a 15 per
cent increase that took hold before prices
really spiked. Even JP Morgan’s chief,
Jamie Dimon, a bitcoin sceptic, gave in. ItDANNY
FORTSON
TECH TALK
Crypto is only fun
when it goes up. It
stops being fun as
it comes down
The technology is a reaction to the world
today, in which a handful of giant compa-
nies — banks or Big Tech — act as middle-
men, taking their pound of flesh from any
transaction or interaction we have.
Web3 promises the opposite: a decen-
tralised world in which those middlemen
are replaced by code that records every-
thing on a public ledger called the block-
chain, which no one controls. The lubri-
cant of this new system is digital money.
Yet as the tide goes out, and prices
plummet, the reality has been laid bare.
Most cryptocurrencies, especially those9 GS
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