Executives of cryptocurrency exchanges are bracing for a long, cold crypto winter characterized by layoffs, according to Bloomberg. The reasons for concern include the cratering of crypto prices from their dizzying heights, the FTX debacle, an implosion of a number of crypto platforms and higher interest rates, which dissuade investors from purchasing risky investments.
Bitcoin, the most prominent digital asset, dropped below $16,000 in November, only a year after it hit a record high of $69,000 in November 2021. It is now trading in the $17,000 range at the time of writing this. The crypto sector saw its market capitalization plummet from around $3 trillion to about $900 billion. These issues have frighted both owners of digital assets and potential buyers of altcoins.
In addition to a bear market, well-known crypto exchanges, including Terra Luna, Celsius, Voyager, FTX, Alameda, 3AC, BlockFi and others, collapsed or filed for bankruptcy protection.
Crypto Layoffs
In light of their brutal change in fortunes, crypto companies have enacted layoffs to cut costs and curtail their plans for growth. CoinDesk reported that more than 26,000 jobs have been lost, as of December 5.
Notable Layoffs In Recent Months
- Crypto exchange Kraken shed 1,100 jobs, reducing its workforce by 30%
- Crypto finance firm Galaxy Digital reduced one-fifth of its positions, roughly 170 employees
- Crypto exchange Coinbase shed nearly 60 jobs in November, after laying off 1,100 in employees in June
- Crypto exchange BitMEX reduced its staff by 20% last month, after it already shed 75 positions in April
- Digital Currency Group downsized an estimated 13% of staff
- Dapper Labs reduced its headcount by 22%, letting go of 135 employees
- Aussie crypto exchange Swyftx shed 90 jobs, cutting 35% of its staff
- Bybit plans to reduce 250 positions, a 30% reduction
- South-American crypto exchange Lemon Cash laid off an estimated 38% of its workforce
- Bitcoin financial services firm Unchained Capital cut over 630 jobs
Sam Bankman-Fried Gave A Big Blow To Crypto’s Reputation
The epic rise and sudden implosion of cryptocurrency exchange FTX shocked the financial world. It’s alleged that the now-former disgraced CEO, Sam Bankman-Fried and others engaged in reckless trading activities to stave off an imminent demise.
Through the firm’s affiliated hedge fund, Alameda Research, Bankman-Fried and other employees at the Bahamas-based headquarters were accused of tapping into customers’ funds and digital assets. Without authorization, he reportedly transferred $10 billion of client assets to trade FTX’s way out of impending doom.
At regulated financial institutions, this conduct is forbidden and results in serious civil and criminal repercussions. Since FTX is based outside of the United States—in the Bahamas—and there are open-ended questions about whether or not cryptos are securities, there will be intense scrutiny of the activities that took place.
Why You Need To Be Careful When Looking For A Job In The Crypto Space
The crypto sector is still young and unsettled. This is a cautionary tale for people currently working in or looking to pivot into the space. The industry is largely unregulated and, in light of what happened at FTX, you must be very careful. If you move to a crypto firm, you have to seriously consider your own personal legal liabilities, which is a frightening prospect. Moving on from a company marred by scandal, you will be wearing a scarlet letter on your chest when interviewing for a new job. These perilous issues must be considered if you want to work in digital assets.
Upcoming Regulation And Its Impact
The questionable activities of players in the crypto space and large losses for many naive investors will usher in a new wave of regulation. Up until now, Securities and Exchange Commission head Gary Gensler has sat on the sidelines, debating with other U.S. regulatory agencies about what to do about initiating new rules and regulations. While they were asleep at the wheel, the damage was done.
Now, there is little to no other alternative for lawmakers and regulators to impose strict regulations on the largely unregulated industry. The crafting and enforcement of regulations could be the savior of crypto. The public will become more comfortable wading into the crypto market, knowing that guardrails are in place to ensure that customers won’t get ripped off and taken advantage of. There will be a crucial need for compliance, legal, risk, audit, anti-money laundering and data-privacy professionals.
Despite the challenges of the crypto market, the industry and its adherents have grown accustomed to the boom-and-bust cycles. Many will still be ardent fans of a decentralized market outside the U.S. financial system. According to Reuters, top-tier investment bank Goldman Sachs plans to buy or invest in crypto companies. Its rationale, in part, is that FTX’s implosion has awakened people to the immediate need for honest, transparent and trustworthy regulated cryptocurrency platforms.
Source: Forbes
