The crypto industry is no stranger to rapid growth, precipitous declines and all the volatility in-between, but executives and employees alike are facing some bitter pills to swallow as they search for any kind of upside in the wake of the latest bust cycle that now has thousands dusting off their resumes.
“Firms grew much too quickly during the 2021 bull market that in large part turned out to be a Ponzi scheme,” Gartner Research Senior Analyst Avivah Litan said, adding that the currently depressed market could mean that “many … talented employees will find it difficult to land a new job deserving of their skills.”
Not counting the jobs which evaporated amid the destruction of TerraUSD, Voyager Digital, BlockFi and FTX, many organizations including companies like Amber Group, Kraken and Candy Digital said goodbye to roughly a third of their employees in 2022. Easy money and a banner year in 2021 that saw the total market surpass $3 trillion may have simply pushed some to move too fast and won’t likely be repeated again anytime soon.
“The influx of investor cash encouraged the scaling,” said John Paller, the top executive at Opolis, an employment platform for independent workers. He said that the flood of fresh investment had been spurred by “mostly hype and memes.”
Dozens of companies ramped up hiring in order to meet the demands of a new crop of customers. In many cases, companies more than doubled their headcount in a matter of months, over-hiring as low interest rates facilitated cheap borrowing. It didn’t last long.
Bull market goes bust
“It’s really the first big cycle we’ve seen in the crypto space,” said Denise Carlin, a recruitment executive at technology firm MPCH Labs.
But as the bearish market reared its ugly head, prices plummeted, and a string of bankruptcy announcements grabbed headlines, the layoffs were swift and many. Suddenly, tens of thousands were polishing their resumes and looking for a new job.
Oops… we over-hired!
The risk of growing too quickly had been easily overlooked considering the scope of the bull run. But by year’s end some top executives were quick to capitulate.
“We over-hired in 2021,” said Coinbase CEO Brian Armstrong on a podcast in early December. “I got caught up in it as well. I was like ‘Okay, we have a huge line of customers out the door [and] we can’t even onboard them fast enough.’”
Coinbase laid off more than 1,100 people in 2022. While it’s unclear what percentage of total employees that is, Coinbase currently has about 5,900 employees according to LinkedIn.
Layoffs en masse was not isolated to crypto. With rising inflation, higher interest rates and soaring debt, some of the world’s most-established tech companies also significantly reduced their headcount. Amazon and Meta each cut more than 10,000 jobs. Cisco and Twitter also let thousands of employees go.
Amid the frothy optimism of 2021 and early 2022, crypto executives faced real temptation, and choosing to be overly pragmatic posed a risk, said Rob Paone, a recruiter who specializes in the crypto space as founder of Proof of Talent.
Trading platforms, according to Paone, were forced to decide between hiring enough people to meet the surge in demand and serve a swelling customer base or grow frugally, hire conservatively and risk losing out to bolder competitors.
Headcount and debt
At least one crypto executive believes some companies brought in a large number of new hires for other reasons, as higher headcount numbers allowed firms to seek out and justify larger amounts of fresh capital.
“A few among them almost certainly used unnecessary hiring to acquire debt, giving them more cash on hand,” said Michael Wilson, president and COO of 1GCX, a cryptocurrency and tokenized carbon credit exchange. “Now, those companies don’t have the employees, but they still have the capital.”
The dangers of taking on excess debt by growing too fast and hiring too many people is hardly a new phenomenon. The 21st century is riddled with once promising tech companies that flamed out.
Several years ago, Jessica Livingston, a partner at Y Combinator, said that after seeing more than one thousand startups pass through her Silicon Valley venture capital firm, she observed that staffing too quickly often turned into a poison pill.
“I constantly see startups that die even though they’re on the right track,” she said. “Simply because they hired too fast.”
The search for a silver lining
Many true believers believe the current crypto winter will serve to separate the wheat from the chaff, and the industry will emerge stronger and perhaps more resilient to future down cycles, partly because crypto has evolved into so much more than a collection of digital currencies. In particular, the growing number of use cases for NFTs combined with a major push to bring web3 video games to market has helped the cryptoverse add depth.
The diversification gives Paone hope for the future job market, and he’s noticed there are currently many smaller startups keen to hire. Job seekers, meanwhile, generally appear to be eager to stay in crypto, he also said.
But he admits the road ahead could be a difficult one and possibly not for the faint of heart.
“We’ve seen these big boom and bust cycles [before],” said Paone. “Part of me just thinks that’s the way crypto works, and you kind of have to live with it and survive through it.”
© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.