Crypto Exchanges Cut Jobs As Market Turmoil Triggers Trading Slowdown

Major digital asset exchanges are losing hundreds of workers in a sharp reversal of the industry’s meteoric expansion as a two-year streak gives way to a crypto cooling.

U.S.-listed Coinbase on Tuesday announced plans to lay off nearly a fifth of its workforce, or more than 1,000 people, joining rivals such as Gemini, Crypto.com and BlockFi in downsizing as the Falling crypto prices this year are stifling the trading activity that is the lifeblood of the industry.

“If there is no trading volume, there is no money. . . it looks like it’s going to be tough for a while,” said Julian Sawyer, former chief executive of crypto trading platform Bitstamp.

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The market value of the world’s 500 largest crypto tokens fell from a peak of $3.2 billion in November to under $1 billion this week, wiping out years of gains in major coins such as bitcoin and ether.

The pullback mirrored a broader decline in global financial markets, but was more severe in more speculative asset classes at a time when central banks are backing away from the stimulus measures they supercharged in 2020.

Crypto investors tend to trade much more actively during bull markets. Now, declining volumes are eating away at once-juicy fee trading by making it easier to trade.

Spot trading volumes on major crypto platforms averaged around $800 billion per month from March to May, less than half the level of the same period in 2021, according to Financial Times calculations. based on data from CryptoCompare.

Coinbase had expanded to around 6,000 employees from 3,730 at the end of last year as it rode on the exuberance of the crypto markets.

Rivals that have exploded in recent years are also tearing up their growth plans. Crypto exchange Gemini announced in early June that it would be laying off 10% of its staff amid “turbulent market conditions” which founding brothers Winklevoss said could “linger for some time.” In recent days, Crypto.com also said it would cut 5% of its workforce, or around 260 people, and crypto lending platform BlockFi would lay off a fifth of its workforce, or around 170 people.

Brazil’s Mercado Bitcoin also recently laid off 90 people, or about 12% of its employees. Director Fabricio Tota said the exchange grew from 200 to 700 in just under a year in 2021.

“When you grow so fast, you don’t grow in an organized way. So it’s time to start looking for inefficiencies and be more organized,” Tota said.

Coinbase was already facing backlash inside and outside the company. Last month, he announced his intention to reduce and even cancel some job offers. Chief Financial Officer Alesia Haas said in a panel interview last week that “we are operating in uncertain times.”

John (pseudonym) had quit his job and was preparing to leave Europe for London for a job at Coinbase. “Here, everything was packed. Any move is a big deal, you put everything in order, you say goodbye to people, I saw someone here. Everything fell apart,” he said. After his failed UK visa application, he found himself trying to return to his old job.

Rick Chen, public relations manager at employee information sharing platform Blind, said Coinbase reassured people that the deals would not be rolled back. “To get whiplash a few weeks later when it’s not, I haven’t seen anything like it,” he said. Coinbase pointed to a blog post and Twitter posts senior staff and made no further comment.

A former Gemini senior executive says the company’s recent cuts announcement is just the tip of the iceberg, saying the exchange was “over-hired” in the crypto bull market. Last year.

“Ten percent is completely underestimated. Without people knowing, Gemini had been letting important people go since March,” the former employee said. Gemini declined to comment.

Charley Cooper, chief executive of blockchain software company R3, warned that “hubris” often enveloped the crypto industry.

“The laws of economics also apply to crypto. It’s very hard to convince people in traditional finance that you’re serious about business if you constantly believe that your asset class is immune to the laws of economics,” he said.

The increasing regulation of crypto-assets has also resulted in additional costs for operators. “If you do it right, the regulatory overhead is huge because we have to dive into the old world and keep up with the new world,” said Eric Demuth, managing director of Austrian exchange Bitpanda.

But how cold exchanges feel may depend on their business model, such as whether they offer derivatives trading or whether they depend on institutional traders for their revenue.

Column chart of derivatives volumes on major exchanges (in billions of dollars) showing that crypto derivatives are trading more resilient than spot

Over the past three months, trading in derivatives that facilitate bets on the future direction of coins has declined 17% from peak levels, far less than the drop in spot, according to CryptoCompare.

Crypto exchange FTX, which has 300 employees, said it remained “strongly profitable”. Binance, the largest exchange by volume, said it will continue its hiring pace. “We believe colder markets provide the best opportunity for organizations to invest or acquire large projects at a better price,” Binance said.

OKex chief executive Lennix Lai said the exchange plans to add 30% to its 2,800 employees next year.

But for people like John, it was a hard lesson.

“I would love for people to have a memory long enough to punish companies that behave like this, but unfortunately we live in a world with a memory of a week on the most outrageous issues,” he said. .

Video: Highlights from the FT Summit on Crypto and Digital Assets | FT live



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Crypto Exchanges Cut Jobs As Market Turmoil Triggers Trading Slowdown


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