The bitcoin and cryptocurrency market was rocked by the collapse of the stablecoin terraUSD (UST
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The bitcoin price has lost almost 70% of its value since it peaked in November last year, crashing under $20,000 per bitcoin last month. The ethereum price has seen even wilder swings, along with most other major cryptocurrencies, as the market braces for a Federal Reserve earthquake.
Now, after warnings of a “crisis on the horizon” for bitcoin and crypto exchange Coinbase, fears are growing among the investment community that the U.S. securities watchdog could pursue legal action against venture capitalists who knowingly sold hollow digital assets to retail investors—with angel investor Jason Calacanis predicting “this is going to blow up in the faces of the venture community.”
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“I believe the overwhelming majority of tokens are securities, but they’re being dumped onto retail investors. And this is being done explicitly by venture firms,” Calacanis told Bloomberg.
Earlier this year, the U.S. Securities and Exchange Commission (SEC) doubled the number of staff in its Crypto Assets and Cyber Unit as it wrestles with the red-hot bitcoin and crypto market. The combined crypto market ballooned to an eye-watering $3 trillion value last year before crashing by around $2 trillion over the last few months due to the Federal Reserve’s increasingly hawkish stance and the collapse of the Terra blockchain ecosystem that’s caused a confidence crisis among various crypto lenders and brokers.
“The tide’s gone out,” said Calacanis, referring to this year’s crypto market crash that he thinks will trigger “years of litigation and pain and suffering.”
“The majority of these tokens that are being sold are either pre-launch companies, which would value them at $3 million to $10 million, or they’re frauds, or they’re run by incompetents or they’re frauds run by incompetents. It’s some combination of those three buckets,” said Calacanis, who made a name for himself as an Silicon Valley investor with big bets on ride-hailing app Uber, commission-free trading app Robinhood and meditation app Calm.
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SEC chair Gary Gensler has previously branded the bitcoin and crypto market a “Wild West” and has repeatedly warned many crypto companies are “non-compliant.”
However, Calacanis said those creating and funding cryptocurrencies are more responsible than the exchanges and platforms that act as a marketplace for digital assets. Earlier this year, the SEC found crypto lender BlockFi to be an unregistered investment company, settling with the company for $100 million.
“The people who are creating these things, those are the people who are 99% responsible, and those early investors. I’d say the platforms and other folks, they’re 1% responsible for this,” said Calacanis, calling for rules that would only allow people to invest in the highly-volatile crypto market that’s plagued by scams once they’d become “accredited.”