Layoffs in the crypto industry may have unintended consequences

  • Studies have shown that layoffs are likely to increase the chances of bankruptcy
  • Despite being in a bear market, many companies are still looking to hire talent

Over the last month, prominent crypto firms have laid off thousands of employees as they prepare for a long crypto winter.

Coinbase has cut 1,180 employees (approximately 18% of its team) and terminated job offers; BlockFi laid off a fifth of its workforce; Gemini laid off about 100 employees; and Singapore-based Crypto.com cut staff by 5%, to about 260 people.

The employees who lose their jobs are likely “marketing people, junior developers and project managers,” Sergey Vasylchuk, CEO of Everstake, told Blockworks.

“As far as I can see in other cryptocurrency companies, first, they fire those who pay too much and then those who receive little but make even less. Middle developers are a much rarer victim of layoffs,” he said.

As these large companies actively reduce their workforce, citing cost reductions and increased efficiency, management teams must assess the long-term impacts of these common organizational practices.

The Journal of Business Research published findings suggesting that “downsizing could create a host of problems that eventually increase the likelihood of bankruptcy.”

Companies lose valuable knowledge when employees leave, and other staff often struggle to manage new workloads. Motivation and commitment are also often affected as trust in management declines.

“It’s important to keep in mind that there are not only direct costs, such as severance and accrued benefits, but also indirect costs, such as reputational damage,” said Dr. Wayne Cascio, a professor at the Denver Business School of the University of Colorado and senior editor. of the Journal of World Business told Blockworks.

Cascio says that voluntary turnover in the year following layoffs will often leave employers losing some of their best employees.

“The reason companies are trying to find alternatives to layoffs is to avoid reputational damage, and it makes it easier to attract people once demand returns,” he said.

“If you think a recession is going to last a quarter or half a year, then you probably want to look at alternative ways to cut costs, while retaining the talent you currently have.”

Peter Cappelli, a management professor at The Wharton School, shares this sentiment, telling the university’s business journal Knowledge at Wharton that “there is no evidence that cutting back to improve profitability helps beyond the immediate short-term accounting increase.” .

Despite multiple layoffs, many crypto companies are still hiring. Ryan Selkis, CEO of crypto research firm Messari, Announced on Twitter that the company will hire more than 20 new employees.

Singapore-based crypto exchange Bitget has plans to double its workforce to 1,000 people by the end of the year, and Ukraine-based decentralized staking provider Everstake has onboarded 30 new employees since the start of the war with no plans to lay off any employees.

“Responsible companies that survive the bear market will add even more value to the industry,” Vasylchuk said. “Crypto projects that do not manage risks or fit the product-market will leave the market. It is a good thing because they will free up resources.”


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  • bessie liu

    blocks

    Reporter

    Bessie is a New York-based crypto reporter who previously worked as a tech journalist for The Org. She completed her master’s degree in journalism at New York University after working as a management consultant for more than two years. Bessie is originally from Melbourne, Australia. You can contact Bessie at [email protected]

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