The ongoing crypto winter has seemingly plunged the industry into utter disarray and panic, with many now doing whatever it takes to survive.
Among the major casualties of this prolonged downturn are, of course, the employees who work for crypto companies. Having suffered from substantial market declines, a number of these players, including giants in the industry, have since commenced massive layoffs, cutting over 2,000 jobs in just five weeks.
The world’s largest non-fungible token (NFT) marketplace OpenSea, for example, is laying off about 20% of its workforce. CEO Devin Finzer in a tweet that contains a Slack message addressed to his staff, said it was a “hard day” for them at the company but the unprecedented nature of the current market has forced their hand. He blames the crypto winter for the cuts, adding that he needs to prepare his company in case the situation doesn’t improve soon.
In June, the popular crypto exchange platform Coinbase similarly laid off 1,180 employees, which is about 18% of its entire workforce, citing fears of further economic troubles. Former company employees took to their respective LinkedIn pages to voice their thoughts on the move, with some calling it “abrupt”. CEO Brian Armstrong, echoed the sentiments of many crypto investors saying he’s preparing himself “for the worst”, acknowledging the company’s rapid growth during the crypto boom of the last couple of years.
In the same month, Gemini, another crypto exchange platform, announced it would be downsizing as well, terminating about 10% of its workforce. Other exchanges like Crypto.com also said it was cutting 5% of their staff, while BlockFi said it was cutting up to 20%. Outside of the U.S., Argentina’s Buenbit and Mexico's Bitso both cut around 80 jobs each.
The question now is: What caused all this to happen? For the most part, this current crypto winter feels like a perfect storm of misfortune for the entire market, propelled largely by inflation, rising interest rates and the general anxiety of not knowing where the economy is headed.
Once most of the world opened back up earlier this year, there was an extraordinary demand for consumer goods driven by a years-long pandemic. This, compounded with the Russian invasion of Ukraine, resulted in rising inflation around the world. To counteract this, banking systems like the U.S. Federal Reserve would try to control demand and spending by hiking up interest rates, which in turn discourages investors from taking out loans.
All these weren't good for the market, with more bearish investors quickly selling off their assets in fear of larger losses. And that sentiment sent the value of tokens plunging. Terra’s Luna coin, for instance, was close to being worthless in just about a week, shortly after TerraUSD, a supposed stablecoin, broke its 1:1 peg. Tokens like Bitcoin, Ether and BNB also lost a significant amount of value. Soon enough trillions of dollars have been wiped from the market, sending the industry into panic mode.
The companies who can survive while downsizing should be considered lucky as others like Three Arrows Capital (3AC) no longer have that option. Having defaulted on its loans worth about $675 million in bitcoin and stablecoin, the Singapore-based crypto hedge fund filed bankruptcy after crypto prices declined and its risky trading strategy backfired.
But the crypto winter is not over and the fates of companies can still change in the coming months. Analysts believe the downturn could continue until October at the earliest to the rest of the year. If that’s the case, more layoffs are likely in the cards for the industry.
The only exceptions are the likes of Binance and a couple of others, who see this bear market period as an opportunity. Binance CEO Changpeng Zhao announced last month that it would proceed with filling over 2,000 roles in the company amid the wave of layoffs. The company likely has prepared a deep war chest to keep it running amid such volatile times, with Mr Zhao saying he’s been through crypto winters before.
The crypto winter is here and among the major casualties of this prolonged downturn are the employees of crypto companies.
Major players like OpenSea, Coinbase and Gemini have all commenced layoffs, with over 2,000 jobs cut in the last five weeks.
For the most part, this current crypto winter feels like a perfect storm of misfortune for the entire market, propelled largely by inflation, rising interest rates and the general anxiety of not knowing where the economy is headed.
Binance, however, is one crypto company that's proceeding with plans to fill over 2,000 roles amid the current wave of layoffs.