The previously red-hot crypto and tech environment of 2021, when Bitcoin rose to more than $65,000 and a Bored Ape NFT sold for $2.3 million, is showing signs of cooling, with news of company layoffs and cost-cutting raising questions of whether a snowball is forming.
U.S. employers added more jobs than expected in April, the Bureau of Labor Statistics reported. However, the tech sector, which enjoyed a boom during the pandemic, is showing signs of slowing.
Rising unemployment is an indicator that defines a recession.
Unemployment is contagious, according to the Federal Reserve Bank of San Francisco. “Initial layoffs at the beginning of a recession produce large negative effects on spending and sentiment that spur additional job losses, which compound the economy’s weakness, and so on. The negative feedback loop eventually runs out of steam, but not before inflicting lasting damage on the economy and workers.”
Staff at Gemini Trust, the crypto exchange founded by billionaire Winklevoss twins Cameron and Tyler, learned Thursday that the company plans to cut its workforce by 10 percent as trading plummets industry-wide.
Gemini grew its employee count by 80 percent in 2021 and has 1,536 employees, according to Growjo, a company that tracks fast-growing startups. Gemini has benefited from $423.9 million in total funding and has a $7.1 billion valuation.
Coinmarketcap ranks Gemini ranks as the No. 9 crypto spot exchange by volume.
Crypto exchange Coinbase, ranked No. 3 by volume, announced Thursday it will rescind a number of accepted job offers and will freeze hiring for new and existing positions for the “foreseeable future” as transaction volumes decline.
Coinbase has 4,444 employees and grew its employee count by 133 percent in 2021. The company’s total funding is $547.3 million and its valuation as of January 2022 was $60.2 billion.
Silicon Valley-backed Rain Financial, one of the largest crypto exchanges in the Middle East, has also laid off dozens of employees to cut costs. Latin America’s top exchange Bitso fired 80 employees and Argentina’s Beunbit cut its staff almost 50 percent, Coindesk reported.
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In January, Axios called a peak on startup valuations.
“There’s a swelling sense of dread among employees of companies whose payrolls have been heavily subsidized by venture capitalists,” Dan Primack wrote for Axios. “Layoffs are something that, once begun, tend to snowball. Same goes for hiring freezes.”
Economists don’t think that the tech slowdown necessarily means a broader hiring slowdown is imminent, CNBC reported. The slowdown may be related to tech company expansions during the pandemic and anticipation that it could become harder to get capital as public market valuations fall.
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