Companies within the crypto ecosystem have taken measures to trim their overhead at a point when the value of most digital assets is declining sharply.
The first reports about these lay-offs came out of Coinbase, the popular US-based pure-play crypto exchange, as the company rescinded the job offers it had already made to hundreds of candidates.
The decision prompted multiple negative comments on social media platforms like LinkedIn and Twitter as many of the applicants had already made arrangements to move out to the location to which they were expected to attend.
Meanwhile, the company’s Chief Executive Officer, Bryan Armstrong, announced this morning that 18% of the firm’s payroll will be effectively laid off to “ensure we stay healthy during this economic downturn”. Based on the SEC filing that accompanied the news, approximately 1,100 job positions will be cut.
“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period”, Armstrong stated.
Even though unpopular, Coinbase is not alone in taking these measures as other companies within the crypto industry have opted to lay off a portion of their headcount.
Just yesterday, BlockFi, another pure-play crypto exchange, published a blog post in which it announced that it will be letting go 20% of its payroll due to “market conditions that have had a negative impact on our growth rate”.
According to the press release, the company’s headcount stood at around 850 people meaning that approximately 170 job positions are being cut as a result of the latest wave of negative momentum that the crypto ecosystem is experiencing.
“Since Q1 of 2022, the macroeconomic environment has shifted dramatically, sparking a dramatic pull back in equity and crypto markets. As a result, our number one goal has been to achieve profitability so that we can own our destiny as we navigate what many expect to be an extended global recession”, stated the founders of the Jersey City-based company Zac Prince and Flori Marquez.
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More Job Cuts: Crypto.com and Gemini
Other exchanges like Crypto.com and Gemini have also decided to trim their headcount as prospects for the crypto market appear to be getting gloomier by the day.
A total of 260 workers will be laid off from Crypto.com according to a tweet published by the company’s Chief Executive Officer, Kris Marszalek. This number accounts for around 5% of the company’s total headcount.
Lot's of questions and speculation flying around regarding what https://t.co/pFc4PzqqHR is doing during the market downturn. My thoughts below
— Kris | Crypto.com (@kris) June 11, 2022
“We will continue to evaluate how to best optimize our resources to position ourselves as the strongest builders during the down cycle to become the biggest winners during the next bull run”, Marszalek stated.
Meanwhile, the crypto exchange founded by the Winklevoss brothers published a blog on 2 June in which they announced their decision to cut 10% of the company’s workforce. The exact number of positions that were trimmed was not made clear in the press release but estimates point to a range between 150 and 300 people being laid off based on Gemini’s average headcount prior to the crypto crash.
In regards to their decision, the founders of the crypto exchange stated: “as painful as this moment is, we ultimately see it as an opportunity to double-down on our strongest ideas and customer-centric products so that we may be the catalyst of innovation coming out of these leaner times that will help fuel the next cycle of crypto growth and adoption”.
Why Are Crypto Companies Laying Off So Many People?
The value of cryptocurrencies has been declining since November last year. Back then, the entire ecosystem was valued at around $3 trillion while its value has now declined to nearly $900 billion.
This $2.1 trillion loss affects both investors and companies within the industry quite sharply. For crypto exchanges, whose earnings come primarily from transaction-based fees, lower valuations for crypto assets mean lower revenues.
Therefore, to remain profitable – or stay afloat in some cases – they have to reduce their operating expenditures. One way to achieve this rapidly is to trim their headcount to reduce payroll expenses.
The fact that layoffs have been relatively small in percentage terms – ranging from 5% to 10% of the workforce – indicates that this downturn is not yet seen as a long-term trend. Instead, it is being deemed as a regular bearish cycle that may eventually come to an end.
Whether that is true or not, only time will tell. But, for now, firms are taking appropriate measures to make sure they live to fight another day.
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