‘Crypto Winter’: What’s with All the Mass Layoffs?

It’s another crypto
winter and there is a downsizing wave sweeping through the cryptocurrency

On Tuesday, Coinbase announced
that it was pruning its
workforce by 18% in preparation
for a recession it says could lead to another crypto winter.


Two weeks earlier,
Gemini said it was cutting its
staff base by 10%, citing “current
macroeconomic and geopolitical turmoil.”


In addition, BlockFi, a crypto
lending service, and Crypto.com, a Singapore-based cryptocurrency exchange,
have announced similar actions.

This morning we announced that after taking significant time to plan and consider, we are reducing our headcount by roughly 20%. This is not a decision we take lightly and is one that brings us great sadness.

— Zac Prince (@BlockFiZac) June 13, 2022

While BlockFi said it
was reducing its headcount “by roughly 20%,” Crypto.com on Saturday said it was
letting go of 260 workers or 5% of its corporate workforce.

On the contrary, Binance on Wednesday said it was undergoing talent recruitment for 2,000 open job positions in its exchange.

KuCoin, a Seychelles-headquartered cryptocurrency exchange, also said it has no plan to make any significant changes to its hiring plan for 2022.

“Every year, KuCoin works on its business strategy that already implies some anti-crisis management measures; so we are always ready to react to such market changes,” the exchange wrote in a document shared with Finance Magnates

So, what is with all
these mass layoffs?

Behind the Retrenchments

These downsizing actions
come at a period the cryptocurrency industry is grappling
with continued market volatility and struggling to get back on its feet after the Terra-Luna

At the start of the
week, crypto market capitalization dropped below $1 trillion to levels last
seen in early 2021.

Specifically, Bitcoin
slumped 14%, dropping below $24,000, which is the lowest since December 2020.

How some major coins performed in the last seven days. Source: CoinMarketCap.com

Also, data from CryptoCompare
shows that the total assets under management across all digital asset products fell
by 28.6% in May to $34.2 billion.

Nick Ranger, a senior
cryptocurrency and forex analyst at AskTraders.com, told Finance Magnates that: “some crypto companies were perhaps over-reaching in their pursuit of growth
and market share.”

Dion Guillaume, a high ranking executive
at Gate.io, a crypto exchange platform, blamed ‘irresponsible spending from
the exchanges’ as a contributing factor.

“You are spending
millions on Super Bowl ads and renaming sports stadiums, but you don’t have
any [reserve] in your war chest in case of a crypto winter? That’s ridiculous,”
Guillaume told Finance Magnates.

For his part, Jeremy
Britton, the CFO of Boston Trading, explained that a number of firms had recruited too many
people during the crypto boom of 2020 “thinking the good times would continue.”

“Markets will always
have boom and bust cycles. [Changpeng Zhao] ‘CZ’ from Binance was sensible and did not become
irrationally exuberant, so he is now poised to load up on staff for when the
next boom comes,” Britton added.

Dr Christopher Smithmyer,
an Adjunct Professor at Doane University, a private university in Nebraska, also
put forward a similar view.

“Some of the smaller
groups will panic and lay off people, so will companies that are not managing their
finances properly. People made billions last year; they should have put some
towards a rainy day fund; many just spent it,” Smithmyer said.

Dr. Christopher Smithmyer, lead author of Dragons of the Digital Age

Moreover, Smithmyer noted
that the current crypto winter is a good way to test the crypto market to tease
out poor and weak performers.

However, Scott Melker, a
crypto analyst and investor, believes that the laying off is “a responsible
move based on market conditions.

“This is not a sign that
these companies are struggling, but rather that they are being responsible and
focusing on core business rather than expansion into nascent and untested
sectors that were the darlings of the last bull run,” Melker told Finance

“Coinbase is sitting on a massive pile of cash, minimal debt and huge earnings. They are performing
better than almost any other tech company,” he added.

Guy Gotslak, the Founder of
Crypto IRA platform, My Digital Money (MDM), also pointed out that: “if you are
thinking long-term, this is just a bump in the road.

“Crypto is a young
industry. Of course, it is bound to experience some hiccups along the way.

“If you have the
bandwidth to stay in, stay in. If you have the bandwidth to put in more, do so.
The crash is proving to be epic; the recovery will be just as epic.”

Additionally, Bob Bilbruck,
the CEO of Captjur, a strategic consulting and business aggregation firm, supports this view, noting that “this happens in all emerging markets.

“There is always consolidation after massive growth, the crypto market is no different. In most cases, these groups had massive funding and probably overloaded on their operational need; so cutting manpower is the easiest way to add margin and drop operational costs,” Bilbruck explained.

Other Ways Out?

Experts have attributed
Binance’s strong posturing amidst the wave of industry retrenchments to the
exchange’s global presence and business diversification.

Gotslak explained that
crypto companies need to be better integrated into the mainstream economy if
only to diversify their source of income and asset holding.

Michael Ryan, a
financial planner for over 30 years, pointed out that Binance has been very
proactive in diversifying its business and expanding into new markets.

Bob Bilbruck, the Chief Executive Officer of Captjur

“In addition to its core
crypto exchange business, Binance has launched a number of other businesses,
including a venture capital fund, a fiat-to-crypto exchange, and a
crypto-to-crypto exchange. 

“This diversification
likely gives them a more stable revenue stream, which is important in times of
economic uncertainty,” he explained.

For his part, Guillaume
noted that better budgeting and finances is important.

“It isn’t rocket
science. If you have $2 billion in your chest, then maybe don’t spend $1.8
billion on Hollywood actors preaching about your exchange?” added the Head of Global
PR and Communication at Gate.io.

However, Bilbruck believes that mass layoff during crypto winters and poor economic conditions is

“At the end of the day,
they [crypto-related companies] are like any other company that has employees
and operational costs to scale and run their businesses efficiently,” Bilbruck said.

“Depending on economic
conditions, they may have to scale up or down based on the demand for their
products,” he explained.

As mild recovery begins to kick in for some of the top cryptocurrencies, where else will the industry be headed?

This article was written by Solomon Oladipupo at www.financemagnates.com.