(AP Photo/Mark J. Terrill)
key takeaways
- Digital asset exchange Crypto.com has laid off 20% of its global workforce.
- The announcement is the latest in a long line of downsizing operations by crypto firms, many of which cite the fall of FTX as a key reason.
- It’s not all bad as crypto regulation could be introduced and funding remains strong in the sector.
We all know by now that the crypto winter is in full swing. The industry can’t seem to stay out of the headlines as more companies pull out and scandals are revealed.
Crypto.com is the latest victim of the recession, having announced that it will lay off 20% of its employees.
This is not the first bear market for cryptocurrencies, but its effects are being made significantly worse by the collapse of FTX. Crypto is facing not only an economic downturn, but also a lack of confidence in the sector in general.
Let’s go over exactly what’s happening with Crypto.com, why FTX is involved in the layoffs, and how the cryptocurrency industry is shaping up in 2023.
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what happened
On Jan. 13, Crypto.com stated in a blog post that it was reducing its workforce by 20%. Co-founder and CEO Kris Marszalek said the sacrifice was “in no way related to performance” and that the company “had to navigate continued economic headwinds and unpredictable industry events.”
The move comes after he laid off 5% of employees in July 2022. Marszalek remains optimistic, stating that Crypto.com executives “remain as confident as ever in our mission and vision.”
The layoffs are a stark contrast to the fortunes of Crypto.com just two years ago. In 2021, the exchange bought the naming rights to the iconic Staples Center, now called Crypto.com Arena.
“Fortune favors the brave,” LeBron James said in the company statement. superbowl ad last year. The company did not disclose how much it spent on the ad. Soon after, the cryptocurrency market began to crash.
Are other cryptocurrency companies affected?
Crypto.com’s announcement comes days after Coinbase said it was lay off 950 jobsor about 20% of its workforce.
Both companies are doing better than their counterparts. Crypto bank Silvergate is laying off 40% of its employees, while crypto exchange Kraken announced it was reducing the company by 30% in December last year.
Only one cryptocurrency company bucks the trend. Rumors were circulating around crypto giant Binance, especially after its aborted merger with FTX. To get rid of them, the organization has gone into mass hiring mode with CEO Changpeng Zhao announcing Bitcoin.
BTC
Other parts of the crypto industry have been a disaster. Aside from the FTX elephant in the room, the SEC is suing the Gemini cryptocurrency exchange and the Genesis cryptocurrency lender for offering unregistered securities through the Gemini’s Earn program.
Tyler Winklevoss, founder of Gemini (yes, that Winklevoss) described the movement as “super pathetic”. The SEC strike comes after Genesis laid off 30% of its workforce in 2022.
FTX share
Marszalek commented directly on the FTX situation in the post, saying that the cryptocurrency exchange had taken steps to protect its cash flow but “disregarded the recent FTX collapse, which significantly damaged confidence in the industry.”
The seismic effect that FTX’s crash has had on the crypto market is hard to ignore. FTX filed for bankruptcy in November of last year. Boy-Wonder CEO and crypto darling Sam Bankman-Fried is currently out on bail, awaiting trial for fraud and money laundering, among other charges.
Former FTX President Brett Harrison damned company practices and ethics on Twitter over the weekend. He says he “began to advocate strongly for establishing the separation and independence of FTX US’s executive, legal and developer teams, and Sam disagreed.”
We could well see more crypto companies fold in the first quarter of this year, all blaming the fall from grace of FTX and SBF as the reason for their demise.
What does this mean for cryptocurrencies?
Difficult times are ahead, but most likely it will not be the end. The financial disaster of 2008 led to the bankruptcy of many companies. The technology industry was hit particularly hard, and again in 2020 with the pandemic. Each time, the sector emerged stronger as investors returned to the market when cash became available again.
The real problem is what Marszalek pointed out: trusting cryptocurrencies. There is no denying that FTX has meant that the entire crypto industry has been affected. In such a fledgling industry, this level of scandal could kill him completely.
Crypto has always been volatile. We have seen extreme ups and downs, such as the $69,000 Bitcoin price in 2021 facing the Terra-Luna collapse. Some analysts have Abandoned in price prediction. Despite everything, investors continue to bet on cryptocurrencies.
Is it as bad as it seems?
In short: not necessarily. When the economy crashes, companies look to trim fat. This may ring alarm bells in the media, but reducing the workforce is one of the first places to look when cutting costs. We could read more about Marszalek’s statement, but his blog post insisted that Crypto.com had a strong balance sheet.
Elsewhere in the industry, there is enough good news in the crypto sector to keep the vultures at bay for now. Venom Foundation, an Abu Dhabi-based venture capital firm, has Just Launched his billion-dollar Web3 and blockchain fund. Binance Labs and ABCDE Capital have announced similar companies.
We could see more crypto regulation on the way to prevent another FTX. SEC chief Gary Gensler has turned his attention to the industry, saying crypto companies need to align with regulations or face the consequences. There is a lot of debate about the regulation of cryptocurrencies, but the involvement of the SEC could restore confidence in the sector.
Cryptocurrency fans also believe that the dramatic headline ‘The Halving’ will cause the price of Bitcoin to rise. A hard-coded Bitcoin mining reward halving takes place every four years. This, in turn, reduces the amount of Bitcoin in circulation, which in theory increases demand. The halving could be a draw for investors in crypto companies.
Crypto is down, but probably not out. Seasoned investors will limit exposure without discounting this sector after a long winter.
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