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As crypto industry layoffs spread, is crypto winter here?


Coinbase rescinded job offers this week and Gemini cut jobs while proclaiming crypto winter is here. If so, here’s what investors should know.

What’s being called by some a “crypto winter” is shaking a lot of people out of the young industry. Just this week:

  • Crypto exchange Coinbase extended a hiring freeze and announced in a blog post it was rescinding job offers to an unspecified number of people who had been hired but not yet started work.
  • Bitcoin billionaires Cameron and Tyler Winklevoss announced they would lay off 10% of workers at Gemini, their crypto exchange. “This is where we are now, in the contraction phase that is settling into a period of stasis — what our industry refers to as ‘crypto winter,’” they said in a blog post.
  • The holding company for Mercado Bitcoin, Brazil’s largest crypto exchange, laid off more than 80 employees, Coindesk reports. “The changing global financial landscape, rising interest rates and inflation have been having a major impact on technology-based companies,” 2TM said in a statement, the report says.

These aren’t the first layoffs in the industry during this crypto bear market. Crypto platform BitMEX, Argentinian exchange Buenbit and Latin America’s Bitso also laid employees off in recent weeks.

If this is truly a crypto winter, investors may need to hunker down. It could last a while.

So what’s crypto winter, anyway?

Crypto winter is a well-known phrase in the cryptocurrency realm, referring to a sharp drop in prices and then a long period of price stagnation.

The last one started in 2018 and ran about 18 months, with the total crypto market cap falling by more than 80%.

The current downturn isn’t as bad yet, but since hitting US$3 trillion in November, crypto market cap has declined to US$1.2 trillion.

Much of that decline has followed the drop in global stock markets, reeling from the aftermath of COVID, the war in Ukraine and global inflation. That itself is disconcerting to some experts, since crypto was previously seen as an asset class that was uncorrelated to stocks.

The drop in crypto is deeper than in stocks, exacerbated by the collapse last month of the Terra stablecoin UST and its sister coin, now known as LunaClassic (LUNC). But for the record, so was the ascent to the peak after the 2021 Covid pullback in stocks and crypto.

What’s an investor to do?

The impact of layoffs like these on crypto holders may be mild. Coinbase, in reporting earnings recently, said transactions were down – so those fewer employees would share a smaller workload.

But if this is a crypto winter, the same rules for trading stocks in a bear market likely apply.

Particularly if you’re worried about risk, this could be the time to stock up on the more proven assets like Bitcoin. In the last crypto winter, it fell from a late 2017 peak around US$19,650 to the US$3,200 range. But once it took off again, it soared to above US$69,000 last November.

As with small-cap stocks, smaller and riskier cryptos might bring bigger rewards in bull markets, but they also may not survive a bear market. For proof of that, you need look only at what’s now Luna Classic (LUNC). Tokens valued over US$100 in April are worth a fraction of a cent now.

If you’re making a move, know the risks.

Trying to get a handle on the markets? Cut through the noise with our overview of the best cryptos to buy right now, explore some strategies for how to trade crypto or see if there's a better platform for you with our guide to the best crypto exchanges.

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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