Crypto.com is laying off more of its workforce as the crypto winter deepens

Important takeaways

• Digital asset exchange Crypto.com has laid off 20% of its global workforce.
• The announcement is the latest in a long line of crypto companies downsizing, with many citing FTX’s downfall as a key reason.
• It’s not all bad, as crypto regulation can be introduced and funding remains strong in the sector.

We all know by now that crypto winter is in full swing. The industry can’t seem to stay out of the headlines as more companies fold and scandals are revealed.

Crypto.com is the latest casualty of the recession, having announced that it will lay off 20% of its employees.

This is not crypto’s first bear market, but the effects are significantly exacerbated by the collapse of FTX. Crypto is not only facing an economic downturn, but a lack of confidence in the sector overall.

Let’s go over exactly what’s going on with Crypto.com, why FTX is involved in the mass layoffs, and how the crypto sector is shaping up in 2023.

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What has gone down

On January 13, Crypto.com stated in a blog post that they are reducing their workforce by 20%. Co-founder and CEO Kris Marszalek said the cull was “in no way related to performance” and that the company has “had to navigate ongoing financial headwinds and unpredictable industry events”.

The move comes after it laid off 5% of its employees back in July 2022. Marszalek remains optimistic, saying Crypto.com leaders “remain as confident as ever in our mission and vision.”

The layoffs are a stark contrast to Crypto.com’s fortunes 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’s Superbowl ad last year. The company did not disclose how much it spent on the ad. Soon after, the crypto market began to fall.

Are other crypto companies affected?

Crypto.com’s announcement comes days after Coinbase said it was laying off 950 jobs, or about 20% of its workforce.

Both of these companies are doing better than their counterparts. Crypto bank Silvergate is losing 40% of its staff while crypto exchange Kraken announced it was shrinking the company by 30% last December.

Only one crypto company is bucking the trend. Rumors swirled around the crypto giant Binance, especially after the aborted merger with FTX. To shake them off, the organization has gone into mass hiring mode with CEO Changpeng Zhao announcing that BitcoinBTC will increase its workforce by 15-30% this year.

Other parts of the crypto industry have been a disaster. Aside from the FTX elephant in the room, the SEC is suing crypto exchange Gemini and crypto lender Genesis for offering unregistered securities through Gemini’s Earn program.

Gemini founder Tyler Winklevoss (yes, that Winklevoss) described the move as “super lame“. The SEC’s strike comes after Genesis laid off 30% of its workforce in 2022.

FTX’s commitment

Commenting directly on the FTX situation in the post, Marszalek said the crypto exchange had taken steps to protect cash flow but “did not account for the recent collapse of FTX, which significantly damaged confidence in the industry”.

The seismic effect FTX’s fall has had on the crypto market is hard to ignore. FTX filed for bankruptcy last November. Boy-wonder CEO and crypto darling Sam Bankman-Fried is currently out on bail, awaiting trial on charges including fraud and money laundering.

Former FTX President Brett Harrison blown up the company’s practices and ethics on Twitter this weekend. He says he “began to push strongly to establish separation and independence for the executive, legal and development teams of FTX US, and Sam disagreed”.

We could well see several crypto companies fall in the 1st quarter of this year, all blaming FTX and SBF’s fall from grace as the reason for their demise.

What does this mean for crypto?

Tough times lie ahead, but chances are good that it won’t be the end. The financial disaster of 2008 led to many companies folding. The technology industry was particularly hard hit, and again in 2020 with the pandemic. Each time, the sector emerged stronger as investors flocked back into the market as cash was readily available again.

The real issue is what Marszalek pointed out: trust in crypto. It cannot be denied that FTX has meant that the entire crypto industry has been dealt a blow. In such a fledgling sector, this level of scandal could end it altogether.

Crypto has always been volatile. We have seen extreme highs and lows, such as the $69,000 Bitcoin price in 2021 versus the Terra-Luna crash. Some analysts have given up predicting prices. Despite everything, investors are still betting on crypto.

Is it as bad as it looks?

In a nutshell: not necessarily. When the economy tanks, companies look to trim the 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 into 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 VC firm, has just launched its $1 billion Web3 and blockchain fund. Binance Labs and ABCDE Capital have announced similar ventures.

We could see more crypto regulation on the way to avoid another FTX. SEC chief Gary Gensler has turned his attention to the industry, saying crypto firms must come into line with regulations or face the consequences. There is much debate surrounding crypto regulation, but the SEC’s involvement could restore confidence in the sector.

Crypto die-hards also believe the dramatic title “The Halving” will lead to an increase in the price of Bitcoin. A coded halving of the reward for Bitcoin mining takes place every four years. This in turn reduces the amount of Bitcoin in circulation, and in theory increases demand. The halving could be a draw for investors in crypto companies.

Crypto is down, but probably not out. Experienced investors will limit exposure without discounting this sector after a long winter.

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