Several top US crypto firms have recently announced major layoffs, indicating the industry may face greater challenges. This article originates from an article titled “Bitcoin Is Surging—So Why All the Crypto Layoffs?” by Sander Lutz, organized, translated, and written by Plain Blockchain.
(Background:
After a drop, Bitcoin rebounds from $67,500, with the US presidential election and the Federal Reserve’s interest rate decision looming…
Background Supplement:
Will Bitcoin reach a new high after the US election? How to maximize profits in a highly volatile market)
This week, the US crypto industry had many moments worth celebrating: Bitcoin was inches away from its all-time high, crypto ETFs set new milestones on Wall Street, and this week’s presidential election seemed to promote the development of the ecosystem regardless of the outcome.
However, you can hardly see all these overshadowing a tough week for top US crypto companies. On Tuesday, Ethereum software giant Consensys cut 20% of its global workforce. A few hours later, the New York-based decentralized crypto trading platform DYdX reduced its team size by 35%. The next morning, one of the largest US crypto trading platforms, Kraken, also cut 15% of its employees.
As the week ended, Coinbase released disappointing third-quarter financial results, failing to meet expectations and experiencing a general decline in customer activity. What is going on?
Experts told Decrypt that there could be a variety of factors at play—from short-term election and regulatory-related anxieties that might soon be resolved, to deeper issues regarding the position of crypto-native companies in an industry increasingly dominated by traditional financial giants.
“This is absolutely the most bearish bull market in history,” Alex Tapscott, Managing Director of Digital Asset Investment at Ninepoint Partners, told Decrypt.
Despite optimistic headlines about a crypto rally being seemingly ubiquitous, this narrative only really applies to Bitcoin, Tapscott said, noting that Bitcoin is “increasingly standing out.”
Even Bitcoin’s strength no longer necessarily means gains for the crypto industry.
“Yes, the price of Bitcoin has risen a lot, but where is this money going?” Owen Lau, a senior analyst at investment firm Oppenheimer & Co., told Decrypt. “These funds are flowing into traditional financial companies, not crypto-native companies.”
Lau said that traditional financial giants like BlackRock, through its trading platforms, are purchasing billions of dollars in Bitcoin trades, relying on brand trust and ultra-low costs, leaving crypto trading platforms like Coinbase and Kraken out in the cold. He added that companies related to weaker cryptocurrencies, such as Ethereum and Consensys, are faring even worse. (Disclosure: Consensys is one of Decrypt’s 22 investors, but Decrypt is editorially independent.)
Concerns related to regulatory uncertainty and the upcoming presidential election may largely suppress crypto activity and investment—at least for now.
Kristin Smith, Executive Director of the Blockchain Association, told Decrypt that although she is optimistic that both the Trump and Harris administrations could bring regulatory clarity and support to the crypto industry, the current hostile attitude of the US Securities and Exchange Commission (SEC) towards the industry has already caused significant damage to businesses, which may not be alleviated until next year.
“I think a lot of capital is still on the sidelines, nervous about entering this space until they see more clarity,” Smith said. “So I do think regulatory issues and political issues are both significant factors in all of this.”
Earlier this week, the Blockchain Association launched an initiative tracking how much money leading crypto companies have spent in lawsuits filed by the SEC. The organization said the figure has already exceeded $400 million. On Tuesday, when Consensys announced a 20% staff reduction, CEO Joe Lubin stated that the layoffs were related to the “millions of dollars” spent on defending Consensys in court.
Nonetheless, some experts insist that even if the US government accepts the crypto industry, its troubles will not disappear. Lau of Oppenheimer believes that the current landscape of crypto-native companies, especially CEXs, is too crowded, and many such companies will either go out of business or be acquired by traditional financial firms.
“I don’t know why the market would allow 200 trading platforms in the world,” he said. “It doesn’t make sense to me.”
Meanwhile, Tapscott of Ninepoint thinks that merely removing SEC Chair Gary Gensler is far from enough to unleash a real crypto bull market.
“It’s not just an election issue,” he said. “If you look at past cycles, there’s always some new application or new functionality that gets people excited.”
Tapscott pointed out that iconic innovations such as decentralized applications (dapps) and NFTs once propelled the crypto market to unprecedented heights.
“This time, what is there to excite people like before?” he said. “I think the answer is, not yet.”
While the prospect of politicians and Wall Street embracing crypto is undoubtedly exciting, Tapscott added, this development is not enough to kickstart a real industry bull market, nor can it replace the enthusiasm brought by genuine new blockchain use cases.
“How do you use this technology to do something that was previously impossible?” he said.
?Related Reports?
Bitcoin surges to $71,500 then ‘V-shaped crash,’ US non-farm employment hits post-pandemic low, November rate cut by 1% stabilized?
Italy plans to raise Bitcoin capital gains tax to 42%, local market fears collapse?
Bitcoin spot ETF attracts massive investment! BlackRock’s IBIT sees a single-day inflow of $872 million, setting a new record.