There’s no denying that the crypto market has been under tremendous bear pressure over the past year, as evidenced by the fact that the sector’s total capitalization has continued to hover below the $900 billion mark for most of the year after rising to an all-time high of $3 trillion. in 2021
These conditions are characterized by many companies facing insolvency, as well as many of the world’s leading stock exchanges, which have laid off staff in recent months. Moreover, the recent FTX debacle set off a contagion effect that continued to have a major effect on several crypto platforms, dissuading new investors from entering the space in the process.
As of Q2 2022, a host of prominent crypto entities (including many digital asset trading and lending platforms) such as Terra, Celsius, Bbl, Voyager Digital, Vauld, FTX, Alameda Research, and BlockFi, among others, have completely collapsed or filed for bankruptcy. filing for bankruptcy, indicating even more pain for the industry.
Mass layoffs continue
While the market continues to face major headwinds, several crypto companies, especially exchanges, have had to lay off their workforce. It is estimated that in the first eleven months of this year alone, the industry witnessed more than 26,000 layoffs.
In November, leading cryptocurrency trading platform Coinbase announced a new round of job cuts, with the company reportedly laying off more than 60 employees from its recruitment and institutional onboarding teams. What’s more, earlier this year the company laid off 18% of its staff (roughly 1,100 objections), and the company’s CEO Brian Armstrong admitted to hiring more staff than was necessary to begin with.
Similarly, on November 30, cryptocurrency exchange Kraken announced that it would part ways with 30% of its global workforce — meaning more than 1,000 employees — amid the ongoing market decline. A company spokesperson noted in a blog post:
“Since the beginning of this year, macroeconomic and geopolitical factors have weighed on the financial markets. This resulted in significantly lower trading volumes and a lower number of client applications. We responded by slowing hiring and avoiding major marketing commitments. Unfortunately, the negative impacts on the financial markets have continued and we have exhausted our preferred options to align costs with demand.”
It’s worth noting that back in June, the company said it was looking to expand and grow its operations, primarily by adding 500 experienced individuals (laid off from other companies) to its roster.
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Lastly, the aforementioned layoffs were not limited to US crypto companies, with prominent Australian digital asset exchange Swyftx recently announcing that it had cut 90 jobs. Prior to this development, the company had justifiably laid off 260 employees, reducing the total workforce by 35%. Similarly, popular cryptocurrency exchange Lemon Cash, which has large operations in Argentina and Brazil, announced a 38% reduction in its workforce a month ago, citing a lack of a clear recovery horizon.
Other similar examples worthy of attention
Similar to the above developments, crypto exchange Bybit has also announced that it will launch a new round of job cuts (estimated at around 250 jobs). Up to this point, the company’s CEO Ben Zhou discovered on Twitter that the company is currently trying to manage its costs by realigning its day-to-day operations, especially with the deepening bear market. According to Zhou, this latest decision will have a direct effect on 30% of his staff, adding:
“The planned reduction will be everywhere. We are all saddened by the fact that this reorganization will affect many of our dear Bybuddies and some of our oldest friends.”
Unchained Capital, a Bitcoin (BTC) financial services company, laid off nearly 630 people in November, effectively reducing its workforce by 15%. In a recent post regarding the job cuts, the company’s co-founder and CEO Joe Kelly noted that the layoffs had nothing to do with the recent FTX saga, stating, “Bitcoin-backed loan funding has been significantly constrained by recent market events.”
Digital asset and blockchain company Galaxy Digital, led by popular investor Mike Novogratz, also plans to reduce its staff by at least 20% (nearly 170 employees) to focus on building for the future and maximizing shareholder value over the long term. It’s worth mentioning that since the beginning of the year, Galaxy’s share price has fallen by a whopping 80%.
Digital currency-focused venture capital firm Digital Currency Group (DCG) also recently cut its workforce by nearly 13%, laying off 66 employees. The crypto conglomerate, founded by billionaire Barry Silbert, has said it wants to restructure its finances while promoting several senior executives.
It is interesting to note that DCG subsidiary Genesis Global Trading is one of the key entities involved in the collapse of 3AC, a popular crypto hedge fund that was one of the first major casualties of the year. DCG’s Genesis Asia Pacific Ltd. loaned Three Arrows $2.4 billion, with the hedge fund posting the equivalent of $1.2 billion in crypto and other collateral back in October.
Finally, Dapper Labs, the company behind popular projects including CryptoKitties, NBA Top Shot, NFL All Day, UFC Strike and Flow blockchain, cut its workforce by 22% (135 employees) in November.
Founder and CEO Roham Gharegozlou noted, “These cuts are the last thing we want to do, but they are necessary for the long-term health of our business and communities. We know that Web3 and crypto are the future in a multitude of industries – with 1,000x the potential from here in terms of mainstream adoption and impact – but today’s macroeconomic environment means we don’t have complete control over the timing.”
To better understand the recent layoffs, Cointelegraph reached out to Xiao Xiao, Chief Investment Officer at HashKey Capital, a digital asset financial services group. In his opinion, the layoffs are the result of too many employees on the exchanges, as well as the prevailing crypto winter, adding:
“During a bull market there are many businesses to attend to. Often exchanges are working to introduce new lines of business, which means that it makes sense to hire more people, sometimes more than necessary. But in a bear market, companies tend to focus on how to deploy capital more efficiently. When you consider their potential ROI, it may not be the right time for a new business line.”
He noted that as things stand, many companies are trying to cut unnecessary costs and try to prepare for the next bull run, which is difficult because it requires a lot of staff. “For many major exchanges, the cash situation remains strong and therefore they have the ability to retain large teams,” Xiao said.
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Gökberk Kızıltan, head of communications for Snapmuse.io — a Web3 platform for content creators — told Cointelegraph that the crypto market fluctuates in parallel with the boom and bust cycles of the tech industry: during every market boom, hundreds of projects emerge with their valuations. going higher. Then, during bear runs, users quickly leave, leaving projects with less and less resources. He added:
“Exchanges support this ecosystem. As an entry into cryptocurrencies, they are the ones who need to step up and start hiring during periods of demand. When conditions change and crypto winter inevitably sets in, they often find themselves too big to survive those conditions. Cancellations are their way of survival. The flexibility to hire and fire based on market conditions gives them the agility to meet market expectations during booms and busts.”
He further noted that the layoff problem is not unique to the crypto industry, stating that poor macro market conditions are also reflected on the Nasdaq as the tech industry in general has seen a large number of job cuts recently. “I don’t see the stock market’s reaction to today’s current headwinds any differently than most conventional tech companies are facing,” Kızıltan added.
The recent series of collapses that have hit the market will soon lead to a new wave of regulations. In this regard, so far, the United States Securities and Exchange Commission and its chairman, Gary Gensler, have continued to remain hesitant when it comes to providing clarity on the legal status of digital assets.
However, with the fall of FTX rocking the world, lawmakers seem to be left with little or no choice but to implement regulations in the short term. In fact, many believe that the implementation of quality regulations could revive the crypto-economy, helping newer investors enter the market. Therefore, as we move into a future driven by decentralized technologies, it will be interesting to see how the crypto business sector continues to evolve.