Startup bubble fueled by Fed’s cheap money policy finally burst in 2023
Scooters take over SXSW in Austin, TX
As the last decade came to an end, it was easy for a young engineer to hop on a Bird scooter and ride it to a nearby WeWork office, home to the hottest new crypto startup.
Then came Covid. Electric scooters and coworking spaces were no longer important, but there was a sudden need for tools to enable remote collaboration. Money started flowing into entertainment and education apps that consumers could tap while in lockdown. And while trading crypto.
In both periods, money was cheap and plentiful. The Federal Reserve’s near-zero interest rate policy had been in effect since after the 2008 financial crisis, and Covid stimulus efforts added fuel to the fire, incentivizing investors to take risks, betting on the next big innovation. And crypto.
This year, it all unwound. With the Fed lifting its benchmark rate to the highest in 22 years and persistent inflation leading consumers to pull back and businesses to focus on efficiency, the cheap money bubble burst. Venture investors continued retreating from record levels of financing reached in 2021, forcing cash-burning startups to straighten out or go bust. For many companies, there was no workable solution.
WeWork and Bird filed for bankruptcy. High-valued Covid plays like videoconferencing startup Hopin and social audio company Clubhouse faded into oblivion. And crypto entrepreneur Sam Bankman-Fried, founder of failed crypto exchange FTX, was convicted of fraud charges that could put him behind bars for life.
Last week, Trevor Milton, founder of automaker Nikola, was sentenced to four years in prison for fraud. His company had raised bundles of cash and rocketed past a $30 billion valuation on the promise of bringing hydrogen-powered vehicles to the mass market. December also saw the demise of Hyperloop One, which reeled in hundreds of millions of dollars to build tubular transportation that would shoot passengers and cargo at airline speeds in low-pressure environments.
There is surely more pain to come in 2024, as cash continues to dry up for unsustainable businesses. But venture capitalists like Jeff Richards of GGV Capital see an end in sight, recognizing that the zero interest rate policy (ZIRP) days are squarely in the past and good companies are performing.
“Prediction: 2024 is the year we finally bury the class of ’21 ZIRP ‘unicorns’ and start talking about a new crop of great companies,” Richards wrote in a post on X, formerly Twitter, on Dec. 25. “Never overvalued, well run, consistently strong growth and great cultures. IPO class of ’25 coming your way.” He concluded with two emojis — one of a smiling face and the other of crossed fingers.
Investors are clearly excited about tech. Following a 33% plunge in 2022, the Nasdaq Composite has jumped 44% this year as of Wednesday’s close, putting the tech-heavy index on pace to close out its strongest year since 2003, which marked the rebound from the dot-com bust.
Chipmaker Nvidia more than tripled in value this year as cloud companies and artificial intelligence startups snapped up the company’s processors needed to train and run advanced AI models. Facebook parent Meta jumped almost 200%, bouncing back from a brutal 2022, thanks to hefty cost cuts and its own investments in AI.
The 2023 washout occurred in parts of the tech economy where profits were never part of the equation. In hindsight, the reckoning was predictable.
Between 2004 and 2008, venture investments in the U.S. averaged around $30 billion annually, according to data from the National Venture Capital Association. When the Fed pulled rates close to zero, big money managers lost the opportunity to get returns in fixed income, and technology drove massive growth in the global economy and a sustained bull market in equities.
Investors, hungry for yield, poured into the riskiest areas of tech. From 2015 to 2019, VCs invested an average of $111.2 billion annually in the U.S., setting records almost every year. The mania reached a zenith in 2021, when VCs plunged more than $345 billion into tech startups — more than the total amount they invested between 2004 and 2011.
Too much money, not enough profit
WeWork’s spiral into bankruptcy was a long time in the making. The provider of coworking space raised billions from SoftBank at a peak valuation of $47 billion but was blasted when it first tried to go public in 2019. Investors balked at the more than $900 million in losses the company had racked up in the first half of the year and were skeptical of related-party transactions involving CEO Adam Neumann.
WeWork ultimately debuted — without Neumann, who stepped down in September 2019 — via a special purpose acquisition company in 2021. Yet a combination of rising interest rates and sluggish return-to-office trends depressed WeWork’s financials and stock price.
Adam Neumann of WeWork and Victor Fung Kwok-king, right, chairman of Fung Group, attend a signing ceremony at WeWork’s Weihai Road location on April 12, 2018 in Shanghai, China.
Jackal Pan | Visual China Group | Getty Images
In August, WeWork said in a securities filing that there was a “going concern” about its ability to remain viable, and in November the company filed for bankruptcy. CEO David Tolley has laid out a plan to exit many of the expensive leases signed in WeWork’s heyday.
Bird’s path to bankruptcy followed a similar trajectory, though the scooter company maxed out at a much lower private market valuation of $2.5 billion. Founded by former Uber exec Travis VanderZanden, Bird went public through a SPAC in November 2021, and quickly fell below its initial price.
Far from its meteoric growth days of 2018, when it announced it had reached 10 million rides in a year, Bird’s model fell apart when investors stopped pumping in cash to subsidize cheap trips for consumers.
In September, the company was delisted from the New York Stock Exchange and began to trade over the counter. Bird filed for Chapter 11 bankruptcy protection earlier this month and said it will use the bankruptcy proceeding to facilitate a sale of its assets, which it expects to complete within the next 90 to 120 days.
While the onset of the Covid pandemic in 2020 was a shock to businesses like WeWork and Bird, a whole new class of companies flourished — for a short time at least. Alongside the booming stock prices for Zoom, Netflix and Peloton, startup investors wanted in on the action.
Virtual event planning platform Hopin, founded in 2019, saw its valuation increase from $1.5 billion in December 2020 to $7.75 billion by August 2021. Meanwhile, Andreessen Horowitz touted Clubhouse as the go-to app for hosting virtual sessions featuring celebrities and influencers, a novel idea when nobody was getting together in person. The firm led an investment in Clubhouse at a $4 billion valuation in the early part of 2021.
But Clubhouse never turned into a business. User growth plateaued quickly. In April 2023, Clubhouse said it was laying off half its staff in order to “reset” the company.
“As the world has opened up post-Covid, it’s become harder for many people to find their friends on Clubhouse and to fit long conversations into their daily lives,” co-founders Paul Davison and Rohan Seth wrote in a blog post.
Hopin was equally dependent on people remaining at home attached to their devices. Hopin founder Johnny Boufarhat told CNBC in mid-2021 that the company would go public in two to four years. Instead, its events and engagement businesses were swallowed up by RingCentral in August for up to $50 million.
For some of the latest high-profile failures, the problems stemmed from the tech industry’s blind faith in the innovative founder.
FTX collapsed almost overnight in late 2022 as customers of the crypto exchange demanded withdrawals, which were unavailable because of how Bankman-Fried was using their money. Bankman-Fried’s white knight veneer had gone largely unscrutinized, because big-name investors like Sequoia Capital, Insight Partners and Tiger Global pumped in money without getting any sort of board presence in return.
Nikola’s Milton had dazzled investors and the press, taking on an ambitious effort to transform how cars run in a way that other automakers had tried and failed to do in the past. In June 2020, three years after its founding, the company went public via a SPAC.
Three months after its public market debut, Nikola announced a strategic partnership with General Motors that valued the company at more than $18 billion, which was well below its peak in June.
Within days of the GM deal, short seller firm Hindenburg Research released a scathing report, declaring that Milton was spouting an “ocean of lies.”
“We have never seen this level of deception at a public company, especially of this size,” Hindenburg wrote.
Milton resigned 10 days after the report, by which time concurrent Justice Department and Securities and Exchange Commission probes were underway. Nikola settled with the SEC in December 2021. A week before Christmas of this year, Milton was sentenced to prison for fraud.
Virgin Hyperloop One built the world’s first working, full-sized hyperloop test in Nevada. It ran last year for a little less than a third of a mile, and accelerated a 28-foot pod to 192 miles per hour in a few seconds.
Source: Virgin Hyperloop
‘Growing from lessons learned’
Hyperloop One is another far-out idea that never made it to fruition.
The company, originally called Virgin Hyperloop, raised more than $450 million from its inception in 2014 until its closure this month. Investors included Sir Richard Branson’s Virgin Group, Russia’s sovereign wealth fund and Khosla Ventures.
But Hyperloop One was unable to secure contracts that could take it beyond a test site in Las Vegas, adding to years of struggles that involved allegations of executive misconduct. Bloomberg reported the company is selling off assets and laying off the remaining staff members.
Even for the segments of emerging technology that are still flourishing, the capital markets are challenging outside of AI. Hardly any tech companies have gone public in the past two years following record years in 2020 and 2021.
The few tech IPOs that took place this year stirred up little enthusiasm. Grocery delivery company Instacart went public in September at $42 a share after dramatically slashing its valuation. The stock has since lost more than 40% of its value, closing Wednesday at $23.93.
Masayoshi Son’s SoftBank, which was the principal investor in WeWork and a number of other companies that failed in the past couple years, took chip designer Arm Holdings public in September at a $60 billion valuation. The offering provided some much-needed liquidity for SoftBank, which had acquired Arm for $32 billion in 2016.
Arm has done better than Instacart, with its stock climbing 46% since the initial public offering to close at $74.25 on Wednesday.
Many bankers and tech investors are pointing to the second half of 2024 as the earliest opportunity for the IPO window to reopen in a significant way. By that point, companies will have had more than two years to adapt to a changed environment for tech businesses, with a focus on profit above growth, and may also get a boost from expected Fed rate cuts in the new year.
For some founders, the market never closed. After exiting WeWork, where he’d been propped up by billions of dollars in SoftBank cash in a decision that Son later called “foolish,” Adam Neumann is back at it. He raised $350 million last year from Andreesen Horowitz to launch a company called Flow, which says it wants to create a “superior living environment” by acquiring multifamily properties across the U.S.
Neumann’s WeWork experience isn’t proving to be a liability. Rather, it drove Andreessen’s investment.
“We understand how difficult it is to build something like this,” Andreessen wrote in a blog post about the deal. “And we love seeing repeat-founders build on past successes by growing from lessons learned.”
Dylan Field, co-founder and CEO of Figma, signs the guestbook on the floor of the New York Stock Exchange in New York on July 31, 2025.
Michael Nagle | Bloomberg | Getty Images
Mark Zuckerberg may be the most famous college-dropout-turned-tech-billionaire. Dylan Field is the latest, after his design startup Figma soared in its stock market debut this week.
The two entrepreneurs have something else in common: close ties to Peter Thiel.
Zuckerberg got his first outside check for Facebook from Thiel in 2004, soon before leaving Harvard University to build his social network in Silicon Valley. Facebook went public in 2012, the same year that Field scored a Thiel Fellowship, which gives money “to young people who want to build new things instead of sitting in a classroom.” Over 300 people have been selected since its inception in 2011.
Field, now 33, was part of the second batch of Thiel fellows, a group of 20 entrepreneurs who each took home $100,000. The program doubled that sum earlier this year. Like Zuckerberg, Field came to Thiel from the Ivy League, having spent two and a half years at Brown University in Providence, Rhode Island.
On Thursday, Figma’s stock price more than tripled in its first day of trading on the New York Stock Exchange. It rose again on Friday, wrapping up the week with a fully diluted market cap above $71 billion. Field’s stake is worth about $6.6 billion. Zuckerberg, meanwhile, is now the world’s third-richest person, with a net worth of over $260 billion.
While the contours of Field’s story may sound familiar, he’s a very different kind of character.
“Dylan is, by far, the most humble billionaire I’ve ever met,” said Joshua Browder, CEO of legal services startup DoNotPay and a former Thiel fellow.
Mike Gibson, who used to help run the fellows program as vice president for grants at the nonprofit Thiel Foundation, contrasts Field with another tech luminary.
“He’s kind of like the anti-Steve Jobs,” said Gibson, a co-founder of 1517 Fund, a venture firm that prides itself on investing in dropouts. “When it comes to Jobs’ legend as this hard-charging a–hole, Dylan is the opposite.”
The Apple co-founder, who dropped out of college after one semester, died of cancer in 2011, as his company was on its way to becoming the most valuable business in the world.
Field was poised to officially enter the billionaire ranks almost three years ago. With Figma having emerged as a leader in web-based tools for designing apps and websites, Adobe agreed to snap up its budding rival for $20 billion. But regulators in the U.K. said the tie-up would’ve hurt competition, and the companies scrapped the transaction in late 2023. Adobe payed Figma a $1 billion breakup fee.
Figma’s IPO this week represented not only a massive valuation markup for the company but also served as a banner event for Silicon Valley, which has seen a dearth of high-profile IPOs since the market cratered in early 2022 due to soaring inflation and rising interest rates.
“The most important thing to remind myself of, the team of, is share price is a moment in time,” Field told CNBC’s “Squawk Box” on Thursday. “We’re going to see all sorts of behavior probably today, over the weeks ahead.”
Figma declined to make Field available for an interview for this story.
Field’s trek back to the Bay Area, where he’d grown up, began with a TechCrunch article about the fellowship. He submitted his application two hours before the deadline, on New Year’s Eve of 2011, while he was a junior at Brown. He left out his SAT scores.
“It is my belief that the SAT is a poor reflection of aptitude and can easily be gamed,” he wrote in his application, which he posted on LinkedIn years later. In the essay section, he was asked to offer a highly controversial take.
“Chocolate is repulsive,” he wrote. “Even the smell of it makes me want to vomit.”
In response to a question about how he was going to change the world, Field said he was going to build better software for drones, and that he would “cofound a company with the smartest programmer I know and work on this problem.”
That co-founder was Evan Wallace, who had been a teaching assistant for some of Field’s courses at Brown. Wallace was technologically gifted, earning the nickname “computer Jesus,” or CJ. But he was already 20, meaning he was too old to be eligible for a Thiel Fellowship.
Field scored the $100,000 from Thiel, and shared it with Wallace, convincing him to leave his academic pursuits. The pair moved into a small apartment in Palo Alto, California.
The drone software plan had gone out the window. Wallace wanted to develop something related to WebGL, a graphics rendering system for web browsers. A year later, they were showing investors a slick browser-based demo that allowed for the movement of a ball in a pool of water.
‘Anyone can be creative’
The obvious competitive target was Adobe, which was ending development of Fireworks, an app design product that it acquired with the 2005 Macromedia purchase.
“We thought, ‘Wait, maybe there’s an opportunity here,'” Field said on a podcast earlier this year.
“What we’re trying to do is make it so that anyone can be creative, by creating free, simple creative tools in the browser,” Field said in a 2012 interview for a CNBC special on the Thiel Fellowship.
In 2013, the founders started talking with investors about raising a seed round. Field showed the pool water demo to John Lilly of Greylock Partners at a Starbucks in Palo Alto. Lilly had previously been CEO of Mozilla, where an engineer developed software that led to WebGL. He was impressed with what he was seeing, but he didn’t think it had much economic potential.
Figma took on seed funding from Index Ventures and other investors. The founders assembled a small group of employees at an office in Palo Alto. Progress was slow. Early versions of the product failed to impress potential users. Field was micromanaging.
When Figma would show the product to companies in the Bay Area, reception wasn’t always great. Stress was building. Lilly, who ended up leading Figma’s Series A round in 2014, came to the company’s San Francisco headquarters the following August as struggles were mounting. Employees wanted changes.
“We both heard it,” said Danny Rimer, the Index partner who led the seed funding, referring to conversations he and Lilly were having with staffers about Field.
“We sat down with him and explained to him the situation,” Rimer said. “We heard it and we sort of said, ‘Look, this is an impasse. You’re going to have to adapt and change.’ And he heard it and he changed. I think that’s such a great character trait of Dylan, is to hear the information, be objective about it, process it and accept it and act accordingly, if it makes sense.”
Dylan Field, co-founder and CEO of Figma, speaks at the startup’s Config conference in San Francisco on May 10, 2022.
Figma
Around that time, Sho Kuwamoto joined the company. Kuwamoto brought with him experience from Macromedia and Adobe. Four months later, Figma launched its debut product in a free preview.
Field got involved with users. He replied to people on social media who were posting about Figma, telling them they were receiving access to the preview. He also sought out prominent designers.
Companies like Coda and Uber became early adopters. Some designers were excited by the idea of sharing documents by copying and pasting a URL, instead of having to deal with versions, formats and updates. Figma operated in the cloud, providing all the necessary computing infrastructure, so users didn’t need their own powerful graphics cards.
It wasn’t until September 2016 that Figma made the design editor available for free to the general public and made it possible for multiple designers to make changes in a single file simultaneously. That became the killer feature.
The software started gaining traction inside Microsoft. But there was an issue. Microsoft feared that Figma’s lack of a clear business model might lead to a burial in the startup graveyard. Jon Friedman, a design executive at the software giant, visited Figma’s headquarters to deliver the message, Field told CNBC in 2022.
“Look, we’re all worried you’re going to die as a company,” Field recalled Friedman telling him.
The following year, Figma introduced its first paid tier.
By the time venture stalwart Sequoia Capital came on board in 2019, Figma was a hot commodity, raising its Series C round at a $440 million valuation. Sequoia partner Andrew Reed said some of his firm’s portfolio companies had started migrating to Figma, and founders were using it for pitch decks.
“Companies often will show prototypes in board meetings of new products they want to build, and so the first thing we saw a lot of Figma links for was that,” Reed said in an interview this week.
“It was a very easy investment,” Reed said. “We went through some of our old investment voting data. I think Figma might have been the highest vote we ever had for an investment.”
Sequoia’s extensive roster of winners over the decades includes Apple, Google, LinkedIn, Zoom and WhatsApp.
The Adobe period
Financial analysts covering Adobe started asking about Figma. Adobe, which had released the XD app for user experience design, responded, adding the startup to its official list of competitors.
But Adobe’s market capitalization sat above $170 billion, and Figma wasn’t even a “unicorn,” a status reserved for startups worth at least $1 billion. Field told Forbes that some job candidates were hesitant to join because of the modest valuation. In 2020, the company raised a funding round from Andreessen Horowitz at a $2 billion valuation.
Then came Covid. Offices closed. The world went remote overnight. Figma’s collaboration capability suddenly became critical to the way many more people worked.
“We asked ourselves: how can we help teams connect, have fun and enter a flow state during the earliest stages of the design process?” Field later wrote on Twitter.
The result was FigJam, a digital whiteboard that became Figma’s second product, and represented a key step toward diversification.
The Adobe noise continued to get louder. In 2020, Field had discussions with Adobe executive Scott Belsky about a partnership or acquisition, but Field chose to stay the course. Adobe CEO Shantanu Narayen talked to Field about a possible deal in early 2021, but again the Figma CEO demurred, opting to raise a round at a $10 billion valuation.
“Our goal is to be Figma not Adobe,” Field wrote in a 2021 tweet.
The environment quickly changed. By early 2022, with the Fed lifting interest rates to fight inflation, investors were selling out of high-growth tech and rotating into businesses with predictable profits. Sequoia was encouraging its startups to reduce costs.
David Wadhwani, president of Adobe’s Digital Media unit, speaks at Adobe’s MAX conference in Los Angeles, October 2022.
Adobe
Belsky again approached Field in April of that year, this time alongside David Wadhwani, who was leading Adobe’s digital media business.
“Mr. Field expressed openness to understanding the terms of a potential acquisition of Figma by Adobe, and Mr. Field, Mr. Belsky and Mr. Wadhwani continued their discussion of the potential benefits of a combination the following week,” Adobe stated in a regulatory filing.
Field was considering the implications of the rise of artificial intelligence.
“Look, when we did the deal with Adobe in the first place, my head space in 2022 was, “Oh my god, AI is coming. This is clearly exponential as a technology. I don’t know what this does to us. Is this one-tenth our market, is it 10x our market? What does it mean for creatives and designers?” Field said in an interview with The Verge last year. “And I was like, it’s better to team up in this world with Adobe and to navigate this together and to figure this out together than it is to go it alone.”
In September 2022, Adobe agreed to buy Figma for about $20 billion, announcing that Field would remain in charge of his part of the business and would report to Wadhwani.
“Adobe has a unique opportunity to usher in a world of collaborative creativity,” Narayen told analysts on a conference call the day of the agreement. “In my conversations with Dylan at Figma, it became abundantly clear that together we could accelerate this new vision, delivering great value to our customers and shareholders.”
That opportunity never came. An intensifying regulatory environment in the U.S. and Europe had made sizable tech deals more burdensome. Adobe was suddenly in the crosshairs, and the transaction was hitting repeated hurdles.
“We’re worried this deal could stifle innovation and lead to higher costs for companies that rely on Figma and Adobe’s digital tools — as they cease to compete to provide customers with new and better products,” Sorcha O’Carroll, an official at the U.K. Competition and Markets Authority, said in a press release in mid-2023.
Around that time, Field announced another step toward product diversification by introducing Dev Mode, which turns Figma designs into source code that can serve as a starting point for software developers. The reveal came at Figma’s Config user conference in San Francisco, which attracted 8,000 attendees.
The U.K.’s investigation dragged on for months. Field was pulling double duty running the company and engaging with regulators. Adobe had said it expected to complete the deal in 2023, but time was running out. Regulators were proposing remedies that the parties didn’t like.
“Even toward the final months, there were these moments of, ‘Oh, this is going to go through,’ and moments of, ‘F—, what are we doing?'” Field told The Verge. “And obviously at the end, there’s a mutual understanding of,’ This decision has been made for us and let’s call it.'”
On a Sunday in December 2023, Field gathered board members for a 10-minute call, informing them that the deal was off. The official statement followed early on Monday morning.
“It’s frustrating and sad that we’re not able to complete this,” Field told The New York Times.
Not everyone in Field’s orbit saw it that way. Grammarly CEO Shishir Mehrotra, a friend of Field’s and longtime Figma user, said the whole ordeal was having an impact.
“You could see it in his face,” Mehrotra said of Field, adding that he was relieved when he learned Figma would remain independent. “He was getting older right in front of us.”
But Figma had some business concerns. Its net dollar retention rate, a measurement of the company’s ability to sell more to existing customers, slid from 159% in the first quarter of 2023 to 122% by the end of the year, according to Figma’s IPO prospectus. Figma chalked it up to a tough comparison from the year before, thanks to the launch of FigJam, and economic uncertainty that caused some clients to reduce seat counts. The retention rate bounced back to 132% in the first quarter of 2025.
During the 2023 winter holidays, Field considered ways to rally the workforce. After the new year, he announced internally that Figma would give extra equity to employees who joined or received promotions following the acquisition announcement, because the valuation was going back down to $10 billion. He said any employees who wished to leave would get three months of severance, with no hard feelings.
Fewer than 5% of staffers took him up on the offer.
Pivot to prompting
As Figma pursues a go-it-alone strategy, it faces an existential question: Is the company ready for a future dominated by AI?
In May, Field took the stage at Figma’s user conference before 8,500 attendees at San Francisco’s Moscone Center, wearing a black “Config 2025” T-shirt. He walked the crowd through a slew of new products, including Figma Make, which draws on Claude 3.7 Sonnet, a large language model from AI startup Anthropic.
“With Figma Make, you could take an existing design and prompt your way to a fully coded prototype,” Field said.
A product manager, Holly Li, came up for a demo. At a laptop, she copied the design for a music player in the Figma editor and pasted it into a chat box, typing instructions to rotate the album art like a record while a song is playing. She showed apps created with Figma Make, eliciting some cheers, and returned to the demo.
“Okay. This time, the model had a little bit of difficulty, but that’s okay,” she said. The cloudy background image from the original design was gone, and track names became difficult to read. The crowd was silent. She brought up a working version in a different browser tab.
The feature went live last week. Mehrotra said it’s off to a good start.
Other products in the market were built with generative AI in mind. They include Lovable, Miro’s Uizard and Vercel’s v0. Brent Stewart, an analyst at Gartner, said that Figma is “utterly, utterly dominant” in design but that some of the offerings from other companies look more impressive.
Andrew Chan, a former Figma software engineer, wrote in a blog post last year that “an interesting and ongoing question is whether Figma can repeat the success it had in design with other products.”
Nadia Eldeib, a former Lyft product manager and CEO of startup CodeYam, tried Figma Make before the broad launch and put it up against Lovable and v0. Writing on Substack, she said it appeared to be at an earlier stage.
It’s the sort of feedback that Field will read and send to his employees, known as Figmates. He reads support tickets and mentions of Figma’s name on X, formerly Twitter. He took no time off to address such matters on the very day that his company was conducting its IPO, ultimately pricing shares $1 above the expected range.
Yianni Mathioudakis, a creative director in Maryland, tagged Figma in a post on Wednesday, asking if anyone had found a way to take a Figma Make design and bring it into the main design editor.
“Hi Yianni, we are working towards this and very excited about what it will unlock!” Field replied. “Please keep the Make feedback coming!”
A screen showing the price of various cryptocurrencies against the US dollar displayed at a Crypto Panda cryptocurrency store in Hong Kong, China, on Monday, Feb. 3, 2025.
Lam Yik | Bloomberg | Getty Images
The crypto market slid Friday after President Donald Trump unveiled his modified “reciprocal” tariffs on dozens of countries.
The price of bitcoin showed relative strength, hovering at the flat line while ether, XRP and Binance Coin fell 2% each. Overnight, bitcoin dropped to a low of $114,110.73.
The descent triggered a wave of long liquidations, which forces traders to sell their assets at market price to settle their debts, pushing prices lower. Bitcoin saw $172 million in liquidations across centralized exchanges in the past 24 hours, according to CoinGlass, and ether saw $210 million.
Crypto-linked stocks suffered deeper losses. Coinbase led the way, down 15% following its disappointing second-quarter earnings report. Circle fell 4%, Galaxy Digital lost 2%, and ether treasury company Bitmine Immersion was down 8%. Bitcoin proxy MicroStrategy was down by 5%.
Bitcoin falls below $115,000
The stock moves came amid a new wave of risk off sentiment after President Trump issued new tariffs ranging between 10% and 41%, triggering worries about increasing inflation and the Federal Reserve’s ability to cut interest rates. In periods of broad based derisking, crypto tends to get hit as investors pull out of the most speculative and volatile assets. Technical resilience and institutional demand for bitcoin and ether are helping support their prices.
“After running red hot in July, this is a healthy strategic cooldown. Markets aren’t reacting to a crisis, they’re responding to the lack of one,” said Ben Kurland, CEO at crypto research platform DYOR. “With no new macro catalyst on the horizon, capital is rotating out of speculative assets and into safer ground … it’s a calculated pause.”
Crypto is coming off a winning month but could soon hit the brakes amid the new macro uncertainty, and in a month usually characterized by lower trading volumes and increased volatility. Bitcoin gained 8% in July, according to Coin Metrics, while ether surged more than 49%.
Ether ETFs saw more than $5 billion in inflows in July alone (with just a single day of outflows of $1.8 million on July 2), bringing it’s total cumulative inflows to $9.64 to date. Bitcoin ETFs saw $114 million in outflows in the final trading session of July, bringing its monthly inflows to about $6 billion out of a cumulative $55 billion.
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