On 2nd June, Coinbase made a stunning revelation. According to a statement, the publicly traded crypto exchange will extend a hiring freeze instituted two weeks ago and cancel previous offers to recruits.
It is the latest series of crypto exchange layoffs, which come as both equities and token markets continue to deflate in the face of the US Federal Reserve’s attempts to combat inflation by raising interest rates.
In other words, are these layoffs the beginning of something far worse? Is another crypto winter on the horizon?
Coinbase Pulling Existing Job Offers
The decision by Coinbase to pull existing job offers is outrageous. Assume you were given a position at Coinbase a week ago. You promptly gave your two-week notice at the box factory where you’d been toiling away to feed your family while absorbed in crypto on nights and weekends.
You awoke on Thursday eager to begin a new job in the fascinating world of crypto assets. Then you recieve an email from Coinbase headlined “Update to your Coinbase offer,” with the update “whoops, never mind.”
The action reveals a spectacular tactical blunder of Coinbase. Even as the crypto market steadily declined for more than six months, Coinbase put the brakes on spending thus aggressively, implying that no one at Coinbase sensed issues on the horizon.
Is it possible that no one realized the significance of the Fed’s rate-hiking cycle? Rescinding employment offers is a last-minute panic move resulting from a failure to plan for clear market developments. After all, Fed essentially announced forward guidance ahead of time.
Cut-Offs By Crypto Exchanges’
Coinbase is not alone in battling difficulties. Exchanges have been among the first to report layoffs as the crypto economy slows because more of them are public or regulated companies.
Robinhood, which facilitates stock and cryptocurrency trading and experienced rapid growth during the coronavirus outbreak, has changed course and laid off 9% of its workforce. Bitso, a Mexican exchange, and Rain Financial, a Middle Eastern exchange, have also made layoffs.
The layoff statement from the Gemini exchange of the Winklevoss twins is perhaps the most provocatively worded. Gemini projected the entire industry was “facing a period of stasis” and expressly warned of a coming “crypto winter” when it announced it was laying off 10% of its workforce.
When the total crypto market capital droped to 100 billion USD in December 2018 from nearly 830 billion USD at the start of the year, the term “crypto winter” was coined. The resulting layoffs were significantly worse than the current round in percentage terms.
ShapeShift, a token swap provider, laid off 30% of its employees in one fell swoop in 2019. Many crypto over-the-counter (OTC) desks, which are less vulnerable to market swings than retail-focused exchanges, also cut employees or shut down in early 2019.
Consensys, an Ethereum incubator, downsized 13% of its personnel in December 2018, then spun out numerous incubated “spokes” in even more sweeping cuts. In February 2020, it laid off another 14% of its remaining staff.
These industry-wide layoffs mostly occurred a year after token markets began to decline. It’s been nearly eight months since Bitcoin achieved its all-time high in November 2021 and the current market retracement began. Certainly, we aren’t in the midst of crypto winter. But, it could be lurking in the shadows.