Gemini layoffs are another signal of crypto winter

Hello and welcome to Protocol Fintech. This Friday: Gemini layoffs, killing “Square killer” talk and the state of the crypto VC.

out of the chain

The hospitality industry is rightly skeptical of the prospects for “NFT restaurants,” but a high-profile test is coming to San Francisco. A two-story Japanese restaurant, Shō, arrives at Salesforce Park, the above-ground patch of greenery connected to the Salesforce Tower. He uses NFTs to sell VIP memberships at the Earth, Water, and Fire levels. It’s unclear why this requires a blockchain, as opposed to, say, a spreadsheet, since no one other than the restaurant needs to verify membership status. But it’s a good indicator of how the NFT craze means the concept applies to just about anything expensive and exclusive.

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—Owen Thomas (E-mail | Twitter)

Crypto bulls in winter

Even the biggest bulls in the industry are saying it: Crypto winter is here.

Brothers Tyler and Cameron Winklevoss, almost as famous for boosting bitcoin as they were for tussling with Mark Zuckerberg at Harvard, blamed the cold onset of stagnant crypto markets for their decision to lay off 10% of staff at Gemini, the exchange they co-founded in 2014 .

“This is where we are now, in the contraction phase settling into a period of stasis — what our industry calls ‘crypto winter,'” the brothers wrote to employees on Thursday. “All of this has been further aggravated by the current macroeconomic and geopolitical turmoil. We are not alone.”

Gemini wasn’t even the only one making layoffs that day. Rain Financial, backed by Coinbase Ventures, one of the largest crypto exchanges in the Middle East, also laid off “dozens of employees,” according to Bloomberg.

  • Coinbase, meanwhile, said Thursday that it would rescind some accepted offers and continue the hiring freeze indefinitely. That’s despite the company’s promise in early May that it would ignore the broader tech downturn and stick to a plan to triple its workforce by the end of the year.
  • Latin American crypto exchange Bitso laid off 80 employees last week.
  • Exchanges rely heavily on transaction fees to generate revenue. As crypto prices fall, people tend to trade less often. Gemini is privately held, but publicly traded Coinbase reported a 44% drop in quarter-over-quarter trading volume in May.

The question everyone is asking now: how much worse will it get? Crypto and blockchain startups raised a record $25 billion from venture capitalists last year, according to CB Insights, a nearly eightfold increase from 2020.

  • This influx has fueled a boiling job market, with crypto-related job postings increasing nearly 400% year-over-year, according to LinkedIn.
  • With bitcoin having lost half of its value in the past six months, news from Gemini and Coinbase offers a harbinger that the crypto winter could freeze the labor market – like in 2018.
  • Other expenses could be affected. Crypto marketing is booming, filling the coffers of Super Bowl broadcaster NBC and the NBA.

Yet VC dollars are still abundant for crypto. A May report from JP Morgan noted that venture capital continued to flow to crypto startups despite the collapse of TerraUSD, which could help the industry avoid a prolonged downturn similar to 2018.

  • At this point, a16z has just raised $4.5 billion for its new crypto funds, while Binance has allocated $500 million for a web-focused fund3. Haun Ventures raised $1.5 billion for its first funding in March.
  • Morgan Stanley’s research arm is skeptical. The company said in a report on Tuesday that venture capital funding for crypto companies will likely follow the path of other tech sectors and drop as much as 50% by the end of the year.
  • A big question is how quickly these freshly raised funds will be invested. VCs might just keep their powder dry and wait out the tough market. But at some point, that money has to be deployed.

Crypto believers feel down, not depressed. Gemini’s layoffs are painful, the Winklevoss brothers wrote to employees, but the lean times “will help fuel the next cycle of crypto growth and adoption.”

  • Some valuations have gotten too high and a market correction is needed, argued Bradley Tusk, whose Tusk Ventures backed Coinbase and Circle. “But it’s very different to see crypto as a fad that will now fade,” he said in an email. “It’s not going anywhere. On the contrary, as more and more applications are built on the blockchain, the case for crypto is only going to get stronger.”
  • A group of 26 top technologists made the contrary argument to Congress in an open letter on Wednesday, urging lawmakers to approach the industry with skepticism and calling blockchain technology “ill-suited” for all of the uses currently being promoted by the industry. ‘industry.

The letter is a reminder: the debate over industry regulation is just beginning, crypto winter or not. Regulation doesn’t have to be a bad thing for digital asset values. Some guardrails could increase consumer confidence and help weed out scams. Gemini even ran ads in 2019 around the idea that “revolution needs rules.” Then again, the same day as its layoffs, the company was hit with a CFTC lawsuit alleging Gemini officials misled regulators about a bitcoin futures product during talks in 2017.

Tyler Winklevoss’ answer? “Nut! We obviously disagree with that lol. I’ll answer more fully when I have a minute. Building occupied at the moment.”

—Ryan Defenbaugh (E-mail | Twitter)

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on the money

On protocol: New York State Attorney General Letitia James has warned investors against cryptocurrencies, saying virtual currencies could “produce more anxiety than fortune.”

Binance has teamed up with The Weeknd for their world tour. The crypto exchange giant said the partnership will “integrate Web 3.0 technology for an enhanced fan experience,” and is also the official tour sponsor.

Also on Protocol: The Consumer Financial Protection Bureau is tired of letting fintech play in its regulatory sandbox. The agency said its sandbox initiative proved ineffective, but it was still processing requests. A new Competition and Innovation Office could shake things up by focusing on broader regulation.

Policygenius has reduced its workforce by 25%. The insurance tech startup had raised $125 million less than three months ago.

A moratorium on crypto-mining is back on the table in New York. The state legislature introduced legislation last year that would impose a two-year moratorium on mining that uses proof-of-work. A revised break on new construction passed the state Senate Thursday night. The bill now goes to Governor Kathy Hochul’s office.

North Dakota, meanwhile, is receiving more and more mines. Bitzero is investing between $400 million and $500 million in the state, which it has chosen for its North American headquarters and operations center.

Let’s kill the ‘Square killer’ speech

Square announced this morning that Apple’s two-way “Tap to Pay” feature, which turns iPhones that can already transmit payment card numbers into terminals that can receive them, will be available to select Square sellers this summer. Apple announced a similar partnership with Shopify and Stripe in February.

Currently, iPhone users can pay in-store or on the go by connecting their iPhone to dedicated NFC reader hardware made by companies like Square. The upcoming Tap to Pay feature will allow sellers to collect payments directly through an app on their phone.

Square’s inclusion in Tap to Pay could address overblown perceptions that the new feature is a “Square killer.” As Protocol noted when it was first released, Apple’s unlocking of NFC hardware hasn’t provided the range of payment services needed to make it useful. It has, however, helped Stripe and Shopify — which have ambitions to grow their in-person retail payments — outpace the investment Square has made in card-reading hardware.

Read the full story on Protocol.com.

— Veronica Irwin (E-mail | Twitter)

Table

The slowdown in digital assets hasn’t stopped VCs eager to fund the sector. Although funding fell in May, it is well ahead of last year’s pace, according to data tracked by Dove Metrics. One caveat: data tracks funding announcements, not actual closing dates, so there is some lag.

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A MESSAGE FROM SAP

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When companies invest in maintaining their “green ledger” with the same commitment they have to their financial ledgers, they will be able to connect their environmental, social and financial data holistically so they can steer their business towards sustainability. Ultimately, what gets measured gets managed.

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Gemini layoffs are another signal of crypto winter


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