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Crypto Industry Layoffs May Have Unintended Consequences

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

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

Coinbase cut 1,180 employees (about 18% of its team) and rescinded job openings; BlockFi laid off a fifth of its workforce; Gemini laid off about 100 employees; and Singapore-based Crypto.com cut its workforce by 5%, or about 260 people.

The employees losing their jobs are most likely “marketers, junior developers and project managers,” Everstake CEO Sergey Vasylchuk told Blockworks.

“As far as I can see other cryptocurrency companies, first they fire those who are overpaid, then those who are paid low but make even less. Intermediate developers are much more rarely the victims of layoffs,” he said.

As these large companies actively downsize, citing cost reductions and increased efficiency, management teams need to 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 would eventually increase the likelihood of bankruptcy.”

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

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

Cascio says voluntary turnover the year after layoffs will often leave employers losing some of their best performers.

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

“If you think a downturn is going to last a quarter or six months, you’ll probably want to look at other ways to cut costs, while retaining the talent you currently have.”

This sentiment is shared by Peter Cappelli, 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 of the immediate short-term accounting bump”.

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

Singapore-based crypto exchange Bitget plans to double its workforce to 1,000 by the end of the year, and Ukraine-based decentralized staking provider Everstake has onboarded 30 new employees since the war began. without planning to lay off staff.

“Responsible companies that survive the bear market will bring even more value to the industry,” Vasylchuk said. “Crypto projects that do not manage risk or match the product market will exit the market. It’s a good thing because they will free up resources.


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  • Bessie Liu

    blockages

    Journalist

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

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