Coinbase, BlockFi, and other major companies in the crypto sector have been negatively impacted by the persistent downtrend across the digital and legacy financial markets. The companies have been forced to cut down on their staff to stay afloat and continue with their operation.
According to a new study published in Addictive Tips with data from Layoffs and LinkedIn, Coinbase (COIN) and BlockFi are some of the most affected in the tech and financial industry. The sector has lost over 28,000 jobs in 2022 amid a 1% economic contraction in the U.S. economy.
Coinbase And BlockFi, Worst Layoffs In Tech And Finance?
In the crypto industry, the drawdown has been significant with top cryptocurrencies losing over 80% to 85% of their value from their 2021 all-time high. In the case of Bitcoin and Ethereum, the cryptocurrencies rose to $69,000 and $4,500, respectively, and now trade at around $19,600 and $1,400.
The crypto market was able to reach around $3 trillion in total market capitalization as Bitcoin, Ethereum, and other cryptocurrencies began a major bull run into their current all-time highs. In 2022, the total crypto market cap crashed to a yearly low of around $700 billion.
According to the report, this has led to massive layoffs across multiple sectors. This trend began in March 2020, with the announcement of the COVID-19 pandemic and lockdown measures. At that time, Bitcoin fell to a multi-year low of $3,000.
However, 2022 has experienced another spike in layoffs as central banks rushed to slow down inflation by hiking interest rates, reducing credits, and negatively affecting key economic metrics. As seen in the chart below, BlockFi has lost 20% of its workforce while Coinbase has lost 18%.
This translates into a combined 1,350 jobs that have been lost in both companies with the crypto exchange taking the biggest hit. The company fired 1,100 staff members in 2022 making it the most impacted in the finance sector for Q2, 2022.
Only Robinhood and BlockFi come close with a combined around 600 layoffs over the same period for a total of 29% reduction of their workforce. On the reasons behind this negative performance, the report wrote:
Financial startups like Coinbase, Robinhood, and BlockFi took quite a hit recently. These three companies deal with either stocks or cryptocurrency, both of which have seen a significant downturn in recent months due to fears of an impending economic recession. These downturns have greatly affected business for these companies and led to layoffs — a big surprise for companies that had done well in the past few years, despite a global pandemic.
Is The Worst Part Of The Crypto Winter Over?
With fierce layoffs in Coinbase, BlockFi, and other major cryptocurrencies, with others in bankruptcy, and with larger cryptocurrencies off 80% from their all-time high, should investors start thinking about a potential bottom in the sector?
According to a report from Ecoinometrics, the traditional market and the crypto market, as measured by Bitcoin and Ethereum, could still see some pain in the near future. The assets still have some distance from their previous lows, as seen below.
A report from Barron’s indicates that major players are already loading on Coinbase’s stock possibly preparing for the next bull run. The media outlet claims that investors Tobi Lutke, CEO of Shopify, purchased as much as $3 million on COIN. Will the position pay off?
At the time of writing, COIN’s price trades at $74 with sideways movement on low timeframes.