Several top US crypto companies recently announced a massive wave of layoffs, suggesting that the industry may face bigger challenges. This article is derived from an article by Sander Lutz, “Bitcoin Is Surging—So Why All the Crypto Layoffs?”, compiled, translated, and written by Baihua Blockchain.
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The US crypto industry had many moments to celebrate this week: Bitcoin was just inches away from its all-time high, Crypto ETFs set a new milestone on Wall Street, and this week’s presidential election seemed to boost the development of the ecosystem, regardless of the outcome.
However, you can hardly see these overshadowing the tough week for some of the top US crypto companies. On Tuesday, Ethereum software giant Consensys laid off 20% of its global staff. A few hours later, New York-based decentralized crypto trading platform DYdX reduced its team size by 35%. The next morning, Kraken, one of the largest crypto trading platforms in the US, also cut 15% of its staff.
As the week ended, Coinbase released disappointing third-quarter earnings, failing to meet expectations and a general decline in customer activity. What’s going on?
Experts told Decrypt that there may be multiple factors at work – from short-term election and regulatory anxieties that could be resolved soon, to deeper issues about 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 Assets at Ninepoint Partners, told Decrypt.
Despite optimistic headlines about the crypto surge seeming to be everywhere, this is actually only applicable to Bitcoin, Tapscott said, with Bitcoin increasingly standing out.
Even Bitcoin’s strength no longer necessarily means profits 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. “This money is flowing into traditional financial companies, not crypto-native companies.”
Lau said that Wall Street giants like BlackRock have bought billions of dollars worth of Bitcoin trades through their trading platforms, relying on brand trust and ultra-low fees, leaving crypto trading platforms like Coinbase and Kraken out in the cold. He added that companies related to weak cryptocurrencies like Ethereum, such as Consensys, are even worse off. (Note: Consensys is one of Decrypt’s 22 investors, but Decrypt is editorially independent.)
Concerns related to regulatory uncertainty and the upcoming presidential election have largely suppressed 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 can 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 caused significant damage to businesses and is unlikely to be alleviated until next year.
“A lot of capital is still on the sidelines, and they’re nervous about entering this field until they see more clarity,” Smith said. “So I do think that regulatory and political issues are a major factor in all of this.”
Earlier this week, the Blockchain Association launched an initiative to track 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% layoff, CEO Joe Lubin said the layoffs were related to the “millions of dollars” Consensys spent defending itself in court.
Nevertheless, some experts insist that even if the US government accepts the crypto industry, its troubles will not disappear. Oppenheimer’s Lau believes that the current layout of crypto-native companies, especially CEXs, is too crowded, and many such companies will either disappear or be acquired by traditional financial companies.
“I don’t know why the market would allow there to be 200 exchanges in the world,” he said. “It doesn’t make sense to me.”
Meanwhile, Ninepoint’s Tapscott believes that just getting rid of SEC Chairman Gary Gensler is far from enough to unleash a real crypto bull market.
“It’s not just about the election,” he said. “If you look at past cycles, there’s always some new application or feature that excites people.”
Tapscott pointed out that iconic innovations like decentralized applications (dapps) and NFTs have driven the crypto market to unprecedented highs.
“What’s there to excite people like before this time?” he said. “I think the answer is, not yet.”
While the prospect of politicians and Wall Street accepting crypto is undoubtedly exciting, Tapscott added that this development is not enough to start a real industry bull market, nor can it replace the enthusiasm brought by real new blockchain use cases.
“How do you do something with this technology that was previously impossible?” he said.
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