Crypto.com lays off more of its workforce as Crypto Winter deepens

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(AP Photo/Mark J. Terrill)

Copyright 2022 The Associated Press. All rights reserved. Key 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 scaling back operations, with many citing the fall of FTX as the primary reason. That’s not too bad, as crypto regulation could be introduced and funding remains strong in the industry.

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

Crypto.com is the latest victim of the recession, after announcing it would lay off 20% of its employees.

This is not the first crypto bear market, but its effects are greatly compounded by the collapse of FTX. Crypto is facing not only an economic downturn, but also a lack of confidence in the industry.

Let’s take a look at exactly what is happening with Crypto.com, why FTX is involved in the mass layoffs, and how the crypto industry is shaping up in 2023.

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What happened

On January 13, Crypto.com said in a blog post that it was cutting its workforce by 20%. Co-founder and CEO Kris Marszalek said the elimination was in no way performance-related and the company had to contend with economic headwinds and unpredictable industry events.

The move comes after laying off 5% of employees in July 2022. Marszalek remains optimistic, saying Crypto.com executives remain as confident as ever in our mission and vision.

The layoffs stand in stark contrast to Crypto.com’s fortunes just two years ago. In 2021, the exchange purchased the naming rights to the iconic Staples Center, now named Crypto.com Arena.

Fortune smiles on the brave, LeBron James said in the company’s Superbowl ad last year. The company did not reveal how much it spent on the ad. Shortly after, the crypto market started crashing.

Are other crypto companies affected?

Crypto.com’s announcement comes days after Coinbase announced it was cutting 950 jobs, or around 20% of its workforce.

Both of these companies are doing better than their counterparts. Crypto bank Silvergate is losing 40% of its employees while crypto exchange Kraken announced it was cutting the business by 30% in December last year.

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

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

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

FTX involvement

Marszalek directly commented on FTX’s situation in the post, saying that the crypto exchange took steps to protect its cash flow but failed to take into account FTX’s recent collapse, which significantly damaged confidence in industry.

The seismic effect that the fall of FTX 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, pending trial on charges of fraud and money laundering, among other charges.

Former FTX President Brett Harrison lambasted the company’s practices and ethics on Twitter over the weekend. He says he began to advocate strongly for establishing separation and independence for the executive, legal, and development teams at FTX US, and Sam disagreed.

We may well see more crypto firms fold in the first quarter of this year, blaming all FTXs and SBFs for falling out of favor as the reason for their demise.

What does this mean for crypto?

Hard times are ahead, but chances are it won’t be the end. The financial disaster of 2008 saw many businesses fold. The tech industry has been particularly hard hit, and again in 2020 with the pandemic. Each time, the sector came out stronger as investors returned to the market when cash was readily available again.

The real problem is what Marszalek pointed out: trust in cryptography. There is no denying that FTX meant the entire crypto industry took a hit. In such a nascent industry, this level of scandal could finish it off completely.

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

Is it as bad as it looks?

In a word: not necessarily. When the economy crashes, companies look to cut the fat. This might sound the alarm in the media, but downsizing is one of the first places to look when cutting costs. We could hear more about Marszaleks’ 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 hold off the vultures for now. Venom Foundation, an Abu Dhabi-based venture capital firm, has just launched its billion-dollar Web3 and blockchain fund. Binance Labs and ABCDE Capital announced similar ventures.

We might see more crypto regulation on the way to avoiding another FTX. SEC chief Gary Gensler turned his attention to the industry, saying crypto firms must comply with regulations or face the consequences. There is a lot of debate surrounding crypto regulation, but the involvement of the SEC could restore confidence in the industry.

Crypto die-hards also believe that the spectacular headline The Halving will drive the price of Bitcoin higher. A coded Bitcoin mining reward halving occurs every four years. This in turn reduces the amount of Bitcoin in circulation, which theoretically increases demand. The halving could attract investors to crypto companies.

The crypto is down, but probably not out.

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