Crypto firms hit by wave of layoffs…restructuring fears spread

A cold wind of restructuring is sweeping through the global cryptocurrency industry. The downturn in the crypto market has coincided with job losses driven by the adoption of artificial intelligence (AI), and the combination is seen as a key factor. Concerns are also mounting that the restructuring phase could be prolonged if macroeconomic uncertainties—such as conflicts in the Middle East—persist.

According to the industry on the 23rd, crypto companies, particularly in the United States, have recently carried out successive workforce cuts. A notable example is U.S. cryptocurrency exchange Gemini, which has cut about 30% of its staff so far this year. Another U.S. exchange, Crypto.com, also recently laid off about 12% of its existing workforce.

Projects that issue cryptocurrencies have also moved one after another to restructure. Earlier, the Algorand Foundation, which oversees ALGO, announced on the 18th that it would pursue a 25% workforce reduction. OP Labs, the operator of Optimism (OP), has cut about 20% of its staff so far this month. Polygon Labs, which operates Polygon (POL), and crypto analytics firm Messari have likewise implemented restructuring measures this year.

The accelerating adoption of AI is cited as a core driver behind the restructuring wave hitting the crypto industry. U.S. Big Tech companies such as Meta and Amazon have also recently moved to fully roll out AI, entering large-scale restructuring.

Kris Marszalek, CEO of Crypto.com, said, “Companies that do not push ahead with the (AI) transition immediately will be left behind,” adding, “As part of this change, we proceeded with workforce reductions centered on certain roles that could not adapt to the new environment.”

The crypto bear market that has continued since the second half of last year is also one of the factors behind the layoffs. Michael Saylor, chairman of Strategy, said last month that “the market has entered ‘crypto winter’ (a period of crypto stagnation).” The Algorand Foundation also explained its recent restructuring as “a measure to respond to an uncertain global macroeconomic environment and the broader slump across the cryptocurrency market.”

Alternative’s Crypto Fear & Greed Index has hovered between “Fear” and “Extreme Fear” from mid-January through recently, indicating that investor sentiment has weakened.

Concerns over a ‘prolonged restructuring cycle’

Some analysts say the impact of the brisk merger-and-acquisition (M&A) activity seen in the crypto industry last year also played a role. According to the Financial Times (FT), the value of global crypto-industry M&A deals last year totaled about $8.6 billion, nearly quadrupling from a year earlier (about $2.17 billion).

U.S. crypto-focused outlet CoinDesk reported, “As the broader crypto sector has sharply contracted, companies have been replacing existing staff through ‘acqui-hire’ (acqui-hire·acquisitions aimed at recruiting talent), intensifying job duplication,” adding that “(the recent layoff announcements) could be just the tip of the iceberg.”

What the industry is worried about is a prolonged restructuring phase. The longer shocks to asset markets last due to geopolitical uncertainty originating from the Middle East, the more crypto firms may have no choice but to pursue additional headcount reductions. According to CoinDesk, during the 2022 crypto winter, about 26,000 jobs disappeared across the crypto industry.

Dan Escow, founder of crypto recruiting agency UpTop, said, “The longer the (crypto) market’s difficulties persist, the more companies will inevitably enter cost-cutting mode to buy time to find direction.”

There are also concerns about talent outflows. An industry official said, “The recent restructuring trend is the result of multiple variables—such as economic uncertainty and the AI adoption trend—combining in complex ways,” adding, “If the (crypto market) weakness persists and talent outflows continue, there is also a possibility that innovation in the industry could be delayed.”