Crypto Firms Forced To Scale Back Operations Due To Prolonged Bear Market
The digital currency bear market has adversely affected the operations of many crypto and blockchain-related firms. Significantly, the market capitalization of all cryptocurrencies has dropped from well over $800 billion in January 2018 to currently around $133 billion, according to CoinMarketCap data.
Due to the lack of investor confidence and delays in the launch of highly anticipated crypto-related products such as a bitcoin (BTC) exchange-traded fund (ETF), companies focused on the digital asset sector have been forced to scale back their operations. Some blockchain startups such as Ethereum Classic development firm, ETCDEV have also shut down completely due primarily to lack of funding.
Coinbase Lays Off Several Customer Support Personnel
San Francisco-based digital currency exchange, Coinbase began laying off a few of its customer support specialists in October 2018. According to Yahoo Finance, Coinbase may have laid off around 15 employees who were working remotely. Commenting on its HR policies, Coinbase said “certain teams” perform more “efficiently, effectively” and are also “happier.” In the future, the company said it would only hire “support, fraud, and compliance” personnel for its Coinbase offices, meaning these workers would have to report to a physical location.
Sources also told Yahoo Finance that “senior leadership” at Coinbase was accused of “handling communications poorly” and that the trading platform’s employees were “pretty upset about it.” Although Coinbase’s layoffs may not seem like such a big deal considering that it still has over 500 professionals on its payroll, the American exchange company is planning to go public and was notably seeking a valuation of $8 billion. Potential investors and industry consultants may be more critical of Coinbase’s business management decisions moving forward.
Last year in August, David Marcus, the former vice president of Facebook’s messaging products, left his position as one of Coinbase’s board directors. This, after Marcus joined the US-based exchange’s senior advisory group in February 2017. While Coinbase may have lost Marcus, most of the American fintech’s executives have not left and it doesn’t seem like anyone in senior management will be laid off anytime soon.
ConsenSys Announces Layoffs
In early December 2018, the leading Ethereum-related development firm, ConsenSys revealed it was laying off 13% of its staff members. ConsenSys’ management team explained that the company was “streamlining” certain parts of its business such as “ConsenSys Solutions, spokes, and hub services.” In order to prepare for ConsenSys 2.0, the firm’s next line of products and services, ConsenSys’ management said it would be prioritizing “technical excellence.”
On December 20th, 2018, tech news outlet The Verge reported that ConsenSys was planning to “spin off” most of its 50+ startups (referred to as “spokes”). As part of the process, ConsenSys’ senior management stated it would be laying off around 60% of the firm's employees.
No “Clear Revenue Model”
Commenting on ConsenSys’ recent layoffs, Jonathan Solomon, the co-founder and CEO at DigitalMint, a Bitcoin ATM and point-of-sale (POS) network, said that ConsenSys “did not have a clear revenue model.” He claims that ConsenSys was mainly self-funded by its founder Joseph Lubin, who was operating the company by using his “proceeds” from the crypto bull market.
Attributing the ConsenSys layoffs to issues related to “capital management” and “botched funding”, Solomon noted that digital currency prices have dropped considerably and the type of funding model used by ConsenSys is not “sustainable.” However, ConsenSys explained in a Medium blog post (published on December 26th) that “projects spinning out is a separate concept than ‘layoffs’.” The post stated that the “process of spinning out for ConsenSys spokes” is quite gradual and that each of these projects is on a “unique journey.”
Moving Away From “Incubating Projects Internally”
According to ConsenSys, the company will shift “from incubating projects internally” to collaborating with various other firms. On January 4th, 2019, ConsenSys announced that
“It was working with leading chipmaker AMD and Halo Holdings, a United Arab Emirates-based investment firm, to develop the W3BCLOUD computing architecture. The new computing platform will reportedly be used to help create “optimized datacenter solutions for emerging blockchain workloads.”
Other established crypto firms such as “instant” digital currency exchange, ShapeShift have also had to lay off some of their employees. On January 8th, 2019, ShapeShift revealed it would be laying off about 37% of its workers. ShapeShift’s CEO, Erik Voorhees, said the cutbacks in personnel were “a deep and painful reduction, mirrored across many crypto companies in this latest bear market cycle.”
ShapeShift Did Not Diversify Its Investments
Voorhees acknowledged that ShapeShift had “grown too fast” and that “by the time [the company] learned to manage a 10-person team”, they had already hired more employees.
He admitted that the firm’s “understanding of how to organize people grew, but not as fast as the people.” Notably, Voorhees was critical of ShapeShift’s decision to keep most of its capital invested in digital assets. The early bitcoin adopter mentioned that “as a company, our greatest and worst financial decision is the same: to embrace substantial exposure to crypto assets. Much of our balance sheet is comprised of them.”
Steemit Lays Off 70% Of Its Staff
In late November 2018, Steemit Inc, the developer of the blockchain-based social media platform that now has over 1 million accounts, announced it was planning to lay off 70% of its workforce in order to reduce operational costs. In a video posted to YouTube, Steemit’s CEO Ned Scott stated that the firm was working on restructuring the organization. This, Scott said was a decision Steemit’s management was forced to take due to the extended crypto bear market.
Similar to how ShapeShift had overestimated the long-term prices of digital assets, Scott said Steemit’s management (for the past few months) had been “relying on projections of basically a higher bottom for the [crypto] market.” Steemit’s management had also made important business decisions based on the assumption that cryptocurrency prices would either recover or not drop as low as they have. Because digital asset prices have continued to drop, Steemit has had to lay off “more than 70%” of its staff members.
Steemit Operating “In Survival Mode”
Last week, Steemit Inc. hired Elizabeth Powell as the company’s new managing director. Powell replaced former CEO Ned Scott after she served as Steemit’s head of communications and advocacy. Scott is now serving as Steemit’s executive chairman. According to Powell, the “next 12 months” will be like “survival mode” for Steemit as the company will be operating from a “cost-cutting perspective.” She added that the company was now focusing more on “building ad revenue for the first time on the platform, and getting operation fees under control.”
On December 25th, 2018, it was reported that giant Chinese crypto mining hardware manufacturer Bitmain was making “adjustments to [its] staff” as it was looking to “build a long-term sustainable and scalable business.” The new business strategy, according to Bitmain’s management, involves focusing on initiatives such as AI-related products that are part of its mission statement, and not so much on projects that are “auxiliary.”
“Disappointed” With Bitmain
Also, as pointed out by founding partner at Primitive Ventures, Dovey Wan, there was a post on the Chinese version of LinkedIn stating that Bitmain will start laying off its staff members. On January 14th, 2019, Bitmain Technologies announced it would be shutting down its Amsterdam and Israel-based offices. The company also revealed it was putting its mining operations in Rockdale, Texas on hold. These plans had notably involved Bitmain hiring 400 workers and investing $500 million to establish a major office in Milam County.
In response to Bitmain’s decision, Milam County Judge Steve Young said: “I’m really disappointed because we had advertised this. We had waited for this. We had wanted this. We had welcomed this.”
Blockchain Developers Still In High Demand
Although there have now been an increasing number of reports of crypto firms laying off personnel, LinkedIn’s 2018 US Emerging Jobs report (published in December 2018) showed that there was a high demand for blockchain developers.
Certain segments of the digital asset industry also appear to buck the bearish trend as crypto lending firms such as SALT Lending are reportedly looking to hire more staff members. SALT’s CEO Bill Sinclair stated that “what we’re seeing, especially within our own company, is the ability to create roles that are variations of positions in existing fields.”