Crypto's hiring spree goes in reverse as prices continue to decline
Rising interest rates, worsening inflation and falling stock prices have taken their toll on all Americans, but digital currencies have been hit especially hard.
By David Ingram
Layoffs announced last week at cryptocurrency startups may be just the beginning of a reckoning at crypto startups, some analysts said, as the still-young crypto market faces a sudden reversal from the celebrity-driven boom it experienced a few months ago.
Coinbase, the largest U.S.-based crypto exchange, said it was planning to cut 18% of full-time jobs, or about 1,100 people, and BlockFi, a crypto lending startup, said it was cutting 20% of staff, or about 170 people.
Executives at both companies blamed the possibility of a recession and a slowdown in customer fees for spurring them to try to save additional cash — factors that analysts said are likely to hit the rest of the crypto market, too.
“The worst is not even behind us. It’s just getting started,” said Christopher Vecchio, senior strategist at DailyFX, an analyst firm.
“A lot of these companies tried to expand too quickly, and they had a fundamental misread on the macro environment,” he said.
Rising interest rates, worsening inflation and falling stock prices have taken their toll on all Americans, but digital currencies have been hit especially hard.
Over the weekend, bitcoin not only fell below the closely watched $20,000 price level but briefly dropped below $18,000 before recovering. It’s down about 70% from its all-time high.
Crypto exchanges and related startups often make money through transaction fees, a model that boomed as digital currency gained more converts but looks less attractive if trading volume stalls.
“Right now, the success and failures of all of the businesses in this space are simply tied to adoption and trading volumes,” said Jeff Dorman, chief investment officer at Arca, a digital asset manager.
“Everybody miscalculated the growth and revenue in this industry,” he said.
Some analysts said the dynamic around crypto startups reminded them of the dot-com boom in the late 1990s, when websites fueled by hype and abundant funding hired people far faster than their revenue would usually have justified.
Now, as then, tech entrepreneurs have displayed an urgency to get in early and make a splash.
“You just had a race to secure that customer, so everyone was hiring exponentially,” said Edward Moya, senior market analyst at Oanda, a trading and analytics firm.
Signs of a marketing frenzy have appeared one after another in recent months, including when the exchange Crypto.com bought the naming rights to the Los Angeles Lakers’ home stadium and when several crypto-focused companies ran advertisements during the Super Bowl.