Crypto platforms are feeling the cold.
- BlockFi and Crypto.com announce around 400 layoffs due to difficult market conditions.
- Other crypto platforms have also reduced staff in recent weeks.
- The job cuts are a reaction to a prolonged dip in prices that shows no signs of slowing down.
BlockFi and Crypto.com are the latest crypto exchanges to announce job cuts as crypto’s price slump becomes increasingly entrenched. After the highs of last November, we’ve seen over six months of bearish price action and crypto’s total market cap has fallen by around 66% in what some have dubbed a crypto winter.
In a blog post from founders Zac Prince and Flori Marquez, BlockFi announced it would cut about 20% of its staff — about 170 people. It blamed the “dramatic shift in macroeconomic conditions worldwide” and stressed that customers would receive the same great service they’d come to expect. Earlier this year, BlockFi had to pay a $100 million fine and withdraw its interest-earning accounts in the U.S.
Crypto.com CEO Kris Marszalek tweeted over the weekend that the company would reduce its workforce by about 5% — 260 people. He said that the company would continue to build steadily and position itself for the next bull market. Crypto.com grabbed headlines last year with major advertising and sponsorship deals, such as buying the naming rights to the Staples Center. More recently, it’s been in the news for cutting the platform’s staking rewards.
BlockFi and Crypto.com are not the only crypto platforms to lay off staff. Gemini laid off 10% of its workforce at the start of June, and Coinbase rescinded its job offers to around 300 new hires. Only Binance is bucking the trend and actively hiring. The job cuts are one of many signals that the crypto industry is struggling. Exchanges face lower trading volumes, less activity, and consequently less profits as investors pull back on riskier assets like crypto.
What is a crypto winter?
The term “crypto winter” was last used to describe the prolonged crypto crash of 2018, which lasted well into 2020. It comes after a period of euphoria — such as the frenzy we saw last year when prices soared to new highs. During this time, crypto platforms competed aggressively for market share through expensive advertising and incentive programs.
The climate is very different now. The Federal Reserve continues to pull back on its pandemic-related economic stimulus measures. Last month it raised rates by 0.5%, the biggest rate hike since 2000. It looks like it will announce a similar increase this week, and some warn it may need to take even more aggressive steps.
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In addition to the macroeconomic picture, there’s another cloud hanging over the crypto industry: Increased regulation. Authorities around the world are looking at ways to control this sprawling industry. When they do, it will almost certainly cause more short-term pain. Depending on the steps that get introduced, it could also build long-term confidence, but it is too soon to know.
The challenge for crypto investors is that this is a high-risk industry and many projects could fail. This can understandably pressure people into cutting their losses and selling their assets. However, panic selling rarely turns out well. If you still believe in the long-term viability of a project, the hope is that it will eventually recover and perform well. But it can take nerves of steel to hold on.
Surviving a crypto winter
The knowledge that crypto is a volatile and high-risk asset doesn’t stop it from being devastating to see the value of your portfolio plummet. Many people bought crypto for the first time last year, and some of the activity was driven by a fear of missing out on this new asset class. So far, Bitcoin (BTC) has always eventually recovered and gone on to reach new highs, but we only have a relatively short price history and there are no guarantees.
Unfortunately for investors hoping the market will bottom out, we are likely to see more turbulence in the short term. In a worst-case scenario, experts warn Bitcoin could dip to $10,000 or lower. On the other side, optimists predict the lead crypto could eventually reach $1 million.
The best attitude for investors is to hope for the best and prepare for the worst. This means ensuring that only a small percentage of your portfolio is invested in crypto and that you only invest money you can afford to lose. That way if the Bitcoin believers are correct, you’ll be able to benefit. But if the crypto winter leads to a crypto ice age, it won’t derail your finances.
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