The cold winds of the crypto winter have been blowing for over a year, but the blizzard shows no signs of relenting.
Last year was brutal as a result of crypto crash. The chilly and volatile market has shaved about two-thirds off the cryptocurrency market’s value over the past 14 months. Investors have grown reluctant to invest in the sector as a result, making it harder for businesses to top up their coffers.
Investment drying up has been one of the reasons why casualties were piled high in 2022. Other companies – like Celsius, BlockFi and FTX – collapsed due to a combination of scandals and their business models being found wanting.
This week, crypto companies Coinbase and ConsenSys showed that the crypto winter is far from over. Both businesses were reported to be going through huge layoffs this week, exacerbating the job cuts bloodbath that’s lately been tormenting the overall tech industry.
Coinbase will cut 950 jobs
Cryptocurrency exchange Coinbase suffered through a brutal 2022. Its stocks had been ailing in public markets. Coinbase’s shares lost about 86% of its value as trade volumes dropped.
The company announced two rounds of layoffs in 2022. In June, Coinbase eliminated 18% of its workforce, or nearly 1,100 jobs. The latest round came last November. It cut 60 jobs during those layoffs.
The advent of 2023 doesn’t seem to have aided the ailing firm. Coinbase announced this week that it was laying off 950 employees. That represents about 20% of its workforce. The company also shut down several projects where Coinbase thought it had “a lower probability of success.”
The Coinbase leadership cited the volatile market as part of the reason, but it made it clear that the scandalous collapse of rival FTX at in November weighed heavily on the company.
“We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion,” Coinbase CEO Brian Armstrong wrote in a blog.
That being said, Armstrong added a positive spin on the news, saying that
“Coinbase is well capitalised, and crypto isn’t going anywhere.”
In fact, he suggested that the collapse of a colossal competitor and emerging regulatory clarity could work to its advantage in the long run.
However, he was equally clear that “it will take time for these changes to come to fruition and we need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge.” Hence the layoffs.
Armstrong also added the 950 staffers being ousted shouldn’t think that this was a reflection of their work or contributions to Coinbase.
“Instead, it’s a reflection of the current economic climate and crypto market,” he said.
A small solace for the sacked employees who are now searching for new jobs, occasionally taking to social media to boost their chances.
ConsenSys joins Coinbase in layoffs
Coinbase wasn’t alone in instigating layoffs this year as ConsenSys is also reportedly planning to cut jobs.
The developer of the crypto wallet MetaMask is said to be planning to axe 100 or more jobs, according to a person familiar with the matter told CoinDesk. The company currently has about 900 employees.
ConsenSys has suffered through bear markets in the past. During a crypto slump in 2018, the firm reportedly fired up to 60% of their workforce. It then announced plans to hire 600 employees afterward.
Investment into crypto industry has fallen
The layoffs are another sign of the end of the bull run the crypto industry enjoyed during the pandemic.
During 2020 and 2021, the price of cryptocurrencies like bitcoin and ether jumped to record heights.
At the same time, investors became more interested in blockchain, the technology underlining cryptocurrencies.
In 2019, investors injected $8.3bn into blockchain projects across 836 venture financing, equity offering, private equity and debt offering deals, according to research and analytics firm GlobalData. The data was extracted on December 16.
In 2020, VCs and others backed the industry to the tune of $34.1bn across 701 deals. In 2021, investors injected over $52.1bn into the industry across 1,222
The figures of 2022 are more solemn. The industry only secured $23.6bn across 1,306 deals last year.
GlobalData is the parent company of Verdict and its sister publications.