Cameron and Tyler Winklevoss, the bosses of the Gemini exchange, have found themselves in a dire predicament that stems from a massive miscalculation of market timing, The Information reports.
The twins launched Gemini's Initial Public Offering (IPO) last fall to much fanfare. They also doubled down on this bullish sentiment by funding expensive global expansions, including a highly publicized push into the Australian market, complete with lavish launch parties in Sydney.
They staffed up, increased their overhead, and bet heavily on sustained high trading volumes and rising asset prices to justify their newly minted public valuation.
The timing could not have been worse. The American exchange giant had its much-awaited IPO right on the cusp of a brutal bear market. Shortly after their exchange's public debut, various macroeconomic headwinds (from geopolitical shocks and risk-asset deleveraging) triggered the start of a new bear market.
Gemini was forced to deal with plummeting trading volumes, given that cryptocurrency exchanges rely heavily on transaction fees. When a bear market hits, retail investors flee, liquidity dries up, and revenue falls off a cliff.
Because Gemini had just taken on massive operational costs to fund their global expansion, the sudden drop in revenue created a catastrophic squeeze on their balance sheet.
Gemini Space Station is down nearly 84% from its IPO price, according to the most recent data. The company has lost billions in market value.
A net worth hit
The crypto correction has been extremely expensive for the Winklevoss twins. The plunging stock price of their newly public company immediately eviscerated billions of dollars from their net worth.
Since they positioned their business for a bull market that never materialized, they are now stuck having to right-size a bloated company in the middle of a crypto winter. In late February, Bloomberg reported that Gemini needed to find a new strategy.
Dan Burgin
Vladislav Sopov
