Besides a majority of cryptocurrency prices showcasing positive returns since the start of 2023, there have been major hurdles being faced by the industry in the form of layoffs, lawsuits, and regular outflows. These incidents suggest that irrespective of the positive price performance, the damage faced by the crypto industry in the past year is getting carrying forward in 2023.
In this blog, we will be highlighting these major hurdles along with the companies that are currently facing these hurdles.
Layoffs: Coinbase, Huobi, SuperRare, Genesis, and ConsenSys
The world’s second-largest crypto exchange, Coinbase, announced a further restructuring plan that involves reducing its workforce by 950 employees to cut the operational cost amid the prolonged crypto winter. Brian Armstrong, CEO of Coinbase, said that the exchange is well-capitalized but has to proceed with layoffs to maintain the appropriate operational efficiency. Along with the cut down in the workforce, Coinbase will also shut down several projects with a lower probability of success without specifying what projects will be terminated.
In the past week, Huobi confirmed plans to lay off 20% of its employees as part of an ongoing restructuring following Justin Sun’s acquisition of the firm. He also publicly addressed the rumors of insolvency for the exchange and said that the state of the business is fine and users’ assets are fully protected.
In the same week, SuperRare Labs, the company behind NFT marketplace SuperRare, announced that it will reduce its staff by 30%. John Crain, CEO of SuperRare, cited aggressive growth and over-hiring as the reasons for the reduction while taking full ownership of the mistake.
Genesis Global Trading was also part of a layoff spree as it eliminated 30% of its workers, taking down 145 employees. The sales and business development departments were the most affected. During the past year, in August, Genesis already had cut 20% of its workforce.
ConsenSys, the developer of crypto wallet Metamask, plans to lay off 100 employees or more out of its total 900 workforces. The layoff and related numbers are in the process of being finalized and the exact number is still unknown.
But it’s not just the crypto industry suffering layoffs; big tech companies from Salesforce to Amazon are cutting workforce as the U.S. economy continues to suffer this year
Lawsuits: Celsius Network
The founder and former CEO of Celsius Network, Alex Mashinsky, encountered a new lawsuit filed by New York’s attorney general which alleges that he defrauded investors by concealing the failing financial health of his now-bankrupt cryptocurrency lending platform. For the former CEO, the lawsuit seeks to ban him from doing business in New York and have him pay damages for violating state laws.
Outflows: Silvergate Capital Corp.
Silvergate Capital Corp. reported a sharp drop in crypto-related deposits for Q4 of 2022, sending shares of the bank down more than 43%.
A U.S. attorney told a bankruptcy court that prosecutors had seized U.S. bank accounts at Silvergate and Farmington State Bank, which are affiliated with FTX’s Bahamas-based business, FTX Digital Markets. According to court records, the accounts at Silvergate Bank and Farmington State Bank, which operates as Moonstone Bank, held approximately $143 million. Silvergate also announced that it would reduce its workforce by 40%, or approximately 200 employees, to reduce expenses as the industry pullback worsened.
The collapse of significant stakeholders in the industry in the past year is certainly having repercussions this year. Stakeholders in terms of crypto exchanges and other platforms are still having concerns about financial and operational stability, hence, most of them going forward with restructuring and layoffs. All these suggest that there is still a great concentration of negative sentiment prevailing in the overall market condition with factors from the traditional economy also playing a great role.