After a banner, January jobs report that showed American employers adding more than 517,000 new jobs last month, crypto layoffs are starting to pile up as more companies are feeling macroeconomic- and bear market conditions squeeze their bottom line performance.
Despite the stunning and higher-than-expected jobs report, last month marked the second worst month of crypto layoffs, as companies across the industry shed more than 2,806 jobs according to a recent CoinGecko report.
The crypto job market faced its first crisis in June 2022, seeing a record 3,003 crypto employees being laid off following the collapse of the Terra ecosystem.
Ever since the fall of Terra, the crypto market has experienced a wave of continued headwinds that have caused companies to re-evaluate their current position within the market against macroeconomic challenges.
The fresh wave of layoffs in January has put the crypto market in line to surpass last year’s more than 7,000 layoffs. Experts are predicting that the bear market could continue for yet another several months, as crypto performance has dropped to new lows following the collapse of Terra and the somewhat recent FTX scandal.
Where Are Layoffs Coming From?
Reduction in headcount has primarily been centered around crypto exchanges as trading volumes shrink and revenues decline.
Out of the reported January layoffs, 84% of job cuts came from centralized crypto exchanges, with big names including Blockchain.com, Coinbase, Crypto.com, and Luno taking the lead.
The growing popularity of cryptocurrencies and digital coins left companies expanding at stratospheric rates, as consumers quickly turned into traders. With the growth came an increasing amount of volatility, and companies that were seen going on hiring sprees soon had to change their tone as broader macroeconomic challenges caused major headwinds across the industry.
Bitcoin (BTC) has managed to recover from previous losses experienced earlier in the year, regaining almost 40% of its value according to the live BTC price chart. At the start of February, BTC prices pushed above the $20,000 threshold, keeping steady at just under $23,000.
These price predictions could help the market recover its previous losses, which has left many investors feeling somewhat optimistic, but these remain a long-shot strategy that could go south against the backdrop of recession risks.
While conditions may look as if it’s slowly improving, companies that grew rapidly during the height of the crypto boom can now no longer sustain themselves as broader economic challenges see investors pulling their cash from the market, and novice traders back out against high levels of volatility.
Compared To Tech, Crypto Is Still In A Safe Space
Comparing the number of crypto layoffs throughout the last several months against that of the tech industry, one would have to say that the digital coin market is still in a relatively safe space considering layoffs.
In recent weeks the U.S. tech industry has foregone more than 76,000 tech workers since the start of the year. In total, the mega tech companies and multinational firms have slashed more than 160,000 jobs throughout 2022, as higher inflation, soaring interest rates, and ongoing macro challenges force companies to reduce their headcount.
Companies including Amazing, Google, Microsoft, Meta, and now more recently Dell have all made some major cutbacks in employee retention over the last couple of months.
Perhaps the most significant has been Amazon which announced it will eliminate more than 18,000 workers this year. These cutbacks are a revision of its previous job cuts outlook first announced in the fall of 2022.
Technology and global computer retailer Dell recently announced that it will cut around 5% of its global workforce, cutting about 6,650 jobs.
The crypto job market, which is significantly smaller than that of tech, has also seen its fair share of job cuts. At the start of the year, global exchange platform Coinbase laid off around 950 people in mid-January, a fresh wave of cuts after it already slashed roughly 1,100 jobs near the end of last year.
Job cuts in the crypto industry are considerably lower than that in tech, yet the total number of layoffs in January already represents 41% of the total layoffs of 2022.
The overall poor performance of cryptocurrencies and lower-than-usual market sentiment has left many crypto employers with not a lot of options but to lower headcount to stabilize and consider the future-looking health of their companies against the backdrop of border market declines.
The Pain Is Temporary
While it seems as if the economic conditions are worsening each passing month, we must remind ourselves these conditions are only temporary.
Stubbornly high inflation, ongoing interest rate hikes, and worrisome supply chain issues have caused a ripple effect in the global economy. With countries coming out of pandemic-induced lockdowns, and central banks raising rates to push down rampant running core inflation, experts predict that the economy is on a steady path toward a recession.
While there have been talks of a possible recession for quite some time now, many experts see this as a possible reset for national economies and a way for the global financial system to restart itself again on a new footing.
Although the outlook of a possible recession is growing stronger, there’s still some hope that remains.
On the back of ongoing crypto job cuts, some exchanges such as Binance have recently announced that it will grow its hiring intake by 15% to 30%. The company is one of few crypto exchanges that has managed to sway itself from making any job cuts, yet there is no substantial argument that could keep them from suddenly changing their tone later in the year.
Kraken is another exchange that also announced back in June 2022 that it will hire 500 new employees over several months, looking to fill jobs in customer services, legal, marketing, IT, regional and baking operations, and engineering, among others.
Other employers such as Ripple, and Circle have all posted several dozen new job openings on their websites. While these openings aren’t significant enough to make up for all the recent layoffs, it does show that companies are still looking to fill roles or make some adjustments as they restructure themselves.
Similarly, at the same time, the crypto job market only represents about 0.13% of the entire job market. This is likely to change in the coming years as the industry grows, but there is still a lot of further development necessary before we will see any sudden growth related to market influence.
It’s hard to predict who is next on the chopping block, as the crypto industry finds itself in a sort of limbo period. As coins gain traction, broader macroeconomic problems will keep the market from reaching the rate of recovery it has been yearning for.
Recovering losses from last year could take another several months, but with the possibility of a recession, this will make it harder for the crypto market to find its footing against declining economic conditions.
Job security in the crypto industry might be at an all-time low, for now at least. As market conditions hopefully improve in the coming months, employers could once again reverse their recent layoffs, looking to fill a slew of new open positions, only this time, they’re hiring to keep these roles permanently, rather than a near-term solution for sudden growth spurts.