THE SELL-OFF IN RISK ASSETS RESUMES
Bitcoin fell again today as a sell-off in global risk assets resumed, with crypto investors reeling from a dramatic plunge over the last few days that saw the world’s largest cryptocurrency almost drop below $20,000.
At 4:18 p.m. ET, bitcoin was trading at around $21,000, down more than 3% in the past day, according to data from CoinMetrics.
Bitcoin is sitting at levels not seen since late 2020. The digital currency is down more than 20% in the last week and has dropped more than 60% from its all-time high in November.
Bitcoin has been closely correlated with stock indexes, in particular the Nasdaq, which rose on Wednesday after the U.S. Federal Reserve hiked interest rates by 0.75 percentage point. On Thursday, however, the tech-heavy Nasdaq fell more than 3%.
There are a number of issues weighing on the crypto market.
Sentiment is shaken after the collapse of so-called algorithmic stablecoin TerraUSD along with its sister token luna.
A stablecoin is a type of cryptocurrency that is supposed to be pegged to a real-world asset. Many look to be pegged one-to-one to the U.S. dollar. Some, such as tether and USD Coin, are backed by real assets such as fiat currencies and government bonds. But many algorithmic stablecoins, such as TerraUSD, don’t have assets in reserve. Instead, the $1 peg is governed by an algorithm.
The current bear market, which is often dubbed a new “crypto winter,” is also testing the strength of other projects.
Another algorithmic stablecoin USDD also lost its dollar peg earlier this week. Tron DAO Reserve, which is responsible for maintaining USDD’s $1 peg, holds other cryptocurrencies in their reserve, including the stablecoins tether and USDC.
Meanwhile, all eyes are on Celsius, the crypto lending platform that might be facing insolvency, sparking fears of contagion into the broader market. Earlier this week, Celsius paused withdrawals for customers.
In addition to laying off a fifth of its own workforce, San Francisco-based Coinbase, a three-time Disruptor 50 company, reported a slump in users in its last quarter and a 27% decline in revenue from a year ago. The company gets the majority of its top line from transaction fees, which are closely tied to trading activity.
Binance also hit the pause button this week. The world’s largest crypto exchange halted bitcoin withdrawals for over three hours “due to a stuck transaction causing a backlog.”
It’s becoming a familiar theme for disruptive companies in the space.
THE REST OF THIS WEEK'S HEADLINES
Fanatics hires former Dick Clark Productions CEO to lead its collectibles business
THREE-TIME DISRUPTOR 50 COMPANY
Sports platform Fanatics has tapped former Dick Clark Productions CEO Mike Mahan to lead its trading cards and digital collectibles business. Fanatics Collectibles, which launched in 2021, includes its NFT arm Candy Digital, sports trading card brand Topps, and zerocool — a trading cards brand solely focused on pop culture, art and entertainment.
Brooklyn-based BlocPower has plans to electrify 95% of Menlo Park buildings by 2030
TWO-TIME DISRUPTOR 50 COMPANY
Technology hub Menlo Park, California, home to Meta, is teaming up with Brooklyn, New York-based BlocPower in a new form of public-private partnership to electrify thousands of buildings to help meet a 2030 climate goal of carbon neutrality. The Menlo Park plan will start modestly, with 25 buildings to be electrified this year. It is voluntary, but the plan is to increase that to over 1,000 buildings per year starting in 2024.
FAA requires SpaceX to make environmental adjustments to move forward with its Starship program in Texas
SIX-TIME DISRUPTOR 50 COMPANY
The Federal Aviation Administration says it will require Elon Musk’s SpaceX to make dozens of environmental adjustments in order to conduct further Starship flight tests and begin operational launches from its facility in Boca Chica, Texas. SpaceX will be required to take more than 75 actions to mitigate environmental impacts before the company can receive a launch license for the site, the FAA said in a press release.
Klarna CEO defends business despite massive losses and layoffs
THREE-TIME DISRUPTOR 50 COMPANY
Klarna CEO Sebastian Siemiatkowski has defended his company’s business model and the controversial “buy now, pay later” industry. In an interview with CNBC, the Swedish entrepreneur said BNPL is “superior” to the credit card model, claiming that the average Klarna user has an outstanding balance of $50, whereas the average credit card user has an outstanding balance of $5,000. Siemiatkowski went on to say his business is “extremely recession-proof” compared with traditional credit card firms.
LOOKING BACK AT THE INAUGURAL LIST, 10 YEARS LATER... THIS WEEK: FOURSQUARE
Even if you aren’t aware of it, you probably use Foursquare every single day — or at least its technology.
With more than 125,000 developers worldwide embedding it in their own software, and with 14 billion-plus human-verified “check-ins,” Foursquare is the underlying location engine that powers a myriad of brands, such as Twitter, Snapchat, Uber, Spotify, Airbnb, Coca-Cola, and JetBlue.
But Foursquare wasn’t always behind-the-scenes in location services, let alone interested in being an enterprise technology vendor. In 2009, when Foursquare launched, the iPhone was just over a year old, the App Store had only been around for six months, and location technology was still taking shape. Co-founders Dennis Crowley and Naveen Selvadurai set out to make a social application that would allow users to “check in” as they visited various destinations, and easily connect with friends, meet nearby strangers, and explore cities in an unprecedented way. The user location data produced by the check-ins could then be used to generate customized recommendations, a database of specific venue locations, and ultimately — in Crowley’s grandest vision and most common catchphrase from the company’s early days — a “living, breathing map of the world.”
By the time Foursquare made CNBC’s inaugural Disruptor 50 list in 2013, it had over 30 million users worldwide, hundreds of millions of dollars in funding, and over 3 billion check-ins, gaining more each day. Shortly thereafter, the company split its operations in two, becoming Swarm and Foursquare City Guide, allowing it to focus on both the location discovery and social check-in aspects of the application. But bigger trends taking place in mobile hit the company, and engagement began to rapidly fall.
"THE CRISIS HAS INTENSIFIED"
JOB CUTS HIT THE CYBERSECURITY DISRUPTORS
Nothing has lowered Cybereason’s expectations for growth. Rather, the continuing rise in ransomware attacks has forced its clients to bolster spending on security systems, putting the security software company ahead of schedule when it comes to revenue.
But Cybereason, which made this year's Disruptor 50 list for the second time, is cutting costs anyway. Last week, the company confirmed that it’s laying off 10% of its workforce, or about 100 employees. The reductions follow the dramatic swing in the economy this year and the beating that software stocks have taken in the public market.
A report in April from security company Sophos said that 66% of organizations surveyed were hit by a ransomware attack in 2021, up from 37% the prior year. The average ransom payment increased almost fivefold to more than $800,000, the report said.
The crisis has intensified this year, with cyberattacks from Russia on the rise following the country’s invasion of Ukraine in February. Cybersecurity authorities from the U.S. and four ally countries released an advisory in April, warning of a jump in cyber activity “as a response to the unprecedented economic costs imposed on Russia as well as materiel support provided by the United States and U.S. allies and partners.”
Cybereason’s technology is designed to recognize when and how malicious attacks are taking place by establishing a constant real-time view of what’s happening inside networks. The company has been particularly effective at helping clients fend off ransomware attacks, thanks to a web of sensors across the world that automatically identify anything suspicious or unfamiliar that hits a network.
Last year, Cybereason raised $325 million, taking advantage of an insatiable demand for high-growth software names. Div said he’d set out to raise just $200 million, but money was so free and easy that the company went bigger.
Four months later, the Nasdaq peaked. Since then, the tech-heavy index is down 27%. Cybereason’s closest public market rivals, SentinelOne and CrowdStrike, have dropped 66% and 35%, respectively, over that stretch. Meanwhile, SentinelOne reported revenue growth of 109% in the latest quarter from a year earlier, while CrowdStrike increased 61%.
Across the board, investors have rotated out of high-growth tech, moving into names and sectors that are generally viewed as safer in an environment of rising inflation and interest rates. The IPO market ground to a halt just as Cybereason was confidentially filing paperwork for an upcoming offering.
In late May, cloud security software vendor Lacework, ranked No. 25 on this year's D50 list, said it was cutting 20% of its workforce, just six months after raising $1.3 billion at an $8.3 billion valuation. The company said a “seismic shift” in the markets forced it to make modifications.
“While we do not have control of the environment around us, we do have a responsibility to control how we operate our business and make changes as needed to best position the company for continued and long-term success,” Lacework said in a blog post.
The layoffs and hiring freezes at companies that had been in hyper-growth mode are likely to have a trickle-down effect across the labor market in the industry. While every CEO and recruiter will say that competing for top technical talent, particularly in security, remains as tough as ever, the market turmoil has employers reconsidering how they think about compensation.