Crypto Industry Layoffs May Have Unintended Consequences
Over the past month, prominent crypto companies have laid off thousands of employees as they prepare for a long crypto winter.
Coinbase cut 1180 staff (roughly 18% of its team) and rescinded job offers; BlockFi laid off a fifth of its workforce; Gemini let go of an estimated 100 employees; and Singapore-based Crypto.com reduced staff by 5%, about 260 people.
Employees who losing their jobs are most likely “marketing people, junior developers, and project managers,” Sergey Vasylchuk, CEO of Everstake, told Blockworks.
“As far as I can see from other cryptocurrency businesses, first, they lay off those overpaid and then those who are paid little but do even less. Middle developers are a much rarer victim of layoffs,” he said.
As these large companies actively downsize 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 lead to a host of problems that eventually increases the likelihood of bankruptcy.”
Firms lose valuable knowledge when employees leave, and remaining staff often have difficulty managing new workloads. Motivation and engagement are oftentimes also affected as trust in management dwindles.
“It’s important to keep in mind that there are not only direct costs such as severance and accrued benefits, but there’s also indirect costs such as reputational damage,” Dr. Wayne Cascio, a professor at the University of Colorado’s Denver Business School and senior editor of the Journal of World Business told Blockworks.
Cascio says that voluntarily turnover the year following layoffs will often leave employers losing some of their best performers.
“The reason why firms try to find alternatives to laying off people is to avoid that reputational damage, and it makes it easier to attract people once demand returns,” he said.
“If you think a downturn is going to last a quarter or half a year, then you probably want to take a look at alternative ways to cut costs, while retaining the talent that you currently have.”
This sentiment is echoed by Peter Cappelli, a professor of management at The Wharton School who told the university’s business journal Knowledge at Wharton that “there is no evidence that cutting to improve profitability helps beyond the immediate, short-term accounting bump.”
Despite the multiple layoffs, many crypto companies are still hiring. Ryan Selkis, CEO of crypto research company Messari, announced on Twitter that the company will be hiring more than 20 new employees.
Singapore-based crypto exchange Bitget has plans to double its workforce to reach 1,000 people by the end of the year, and Ukrainian based decentralized staking provider Everstake onboarded 30 new employees since the beginning of the war with no plans to lay off any staff.
“Responsible companies that survive the bear market will bring even more value to the industry,” Vasylchuk said. “Crypto projects that neither manage risks nor have product-market fit will leave the market. It is a good thing because they will free up resources.”
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