Over the past month, prominent
crypto companies have laid off thousands of employees as they prepare for a long crypto winter. Crypto exchange and trading platforms such as Coinbase, Gemini, Crypto.com are slashing its workforce drastically. Just recently, Crypto startup
Blockchain.com says it is laying off 25% of its staff, citing harsh market conditions. The reason is because they want to cut their operating cost to enable them to still be in business.
There has been a general belief that the main reason why most cryptocurrency companies are laying off workers is only because of the bearish market. Although the fall in price of cryptocurrencies is a major reason but there are some other major reasons. Some of them are;
Extravagant spending: When
Crypto.com paid an estimated $1.4 billion in becoming a sponsor for the FIFA World Cup and putting its name on what was previously the Staples Center in Los Angeles within six months many crypto companies including rival firm Binance's CEO Changpeng Zhao criticized this extravagant move. The firm also paid $100 million for Matt Damon to star in Crypto.com’s Super Bowl commercial earlier this year and also partnered with French football club Paris Saint Germain (PSG). Binance who has announced that it would employ about 2000 workers recently confessed that it was not easy saying no to Super bowl ads but it was for the good of the firm. Zhao explained that unlike other crypto companies,
Binance largely avoided spending big on promotional costs like Super Bowl ads or naming rights to sports arenas, which has helped its ability to grow despite rocky market conditions. “|. Nexo, a crypto lending platform, said it will continue growing throughout the bear market and is seeking to fill a range of positions that include engineers and marketers. The company claims to have tripled its headcount in the past year while keeping its “expenses optimized and fundamentals solid,” according to a tweet that directed talent to its We are not spoiled by VCs, Hollywood actors & sports teams,” Nexo said. “We HODL and grow our people, regardless of market conditions.” Most companies a now suffering from financial constrains because they failed to save for the rainy days.
Poor management: When mangers fail to apply several management principles in the company’s operations, it become counterproductive. It was reported that the main reason why
Celsius a decentralized crypto lending platform was forced to halt all user withdraws was because it ran out of funds to repay depositors due to a series of risky decentralized finance bets. Recently, cryptocurrency exchange
CoinFlex issued a new token to raise funds in a bid to restart withdrawals for its customers, after one client failed to repay a massive debt. CoinFlex cannot automatically liquidate the investor collateral because due to poor management the trader had a clause in his account that did not allow that to happen.
Inexperience: Most companies join the crypto space during the bullish market and have no experience about the opposite. In order to survive in this winter, these new companies must laying off workers. But experience players in the crypto space understand the market and have planned ahead of this period.
Kraken an old player in the industry said they have no intentions of making any layoffs and see the current market downturn as a “time to build. It claims to not have adjusted its hiring plans and has 500 positions to fill throughout the remainder of this year. In the statement, the company emphasized it is not guided by “short-term opportunities to maximize profit” and has learned how to navigate through tough times from experience with previous cycles, having been established back in 2011. Many
crypto firms have been through downturns before, and have become better at managing their treasuries.
