Layoffs increase in the middle of "crypto winter"

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New York (CNN Business) --

Hao Jia was so convinced of the potential of cryptocurrencies that he passed up a job at a large technology company, Oracle, to accept another offer he received in early April to be a software engineer at one of the the hottest cryptocurrency startups, Coinbase.

But last week, Jia was one of the employees who received an email from Coinbase terminating his employment contract.

For Jia, that meant not only losing a job, but possibly a visa as well.

"I am an international student and I need to keep my visa," he told CNN Business.

“Now, after Coinbase, I prefer to go to a bigger company because I am worried about my visa.”

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After initially planning to hire up to 2,000 more employees this year, citing "huge product opportunities ahead," Coinbase has abruptly changed course.

In recent days, the cryptocurrency exchange, once valued at nearly $100 billion, has rescinded deals, implemented a hiring freeze and laid off 18% of its workforce.

In a company-wide email sent to employees Tuesday announcing the mass layoff, Coinbase CEO Brian Armstrong noted a potential recession in the making and growth that happened "too fast."

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Employees found out they had lost their jobs after encountering their work emails blocked.

"I realize that removing access will feel sudden and unexpected, and this is not the experience I wanted for you," Armstrong wrote.

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The sudden change in trading at Coinbase reflects a broader trend in the cryptocurrency sector.

An increasing number of startups are cutting staff to survive a possible prolonged downturn in the cryptocurrency market and the broader economy, creating a whiplash sensation in the process among the many workers who joined these companies in the belief that cryptocurrencies were the next big thing.

In a tweet this Saturday, Crypto.com CEO Kris Marszalek announced that the Singapore-based exchange will lay off some 260 workers, or 5% of its workforce.

Another large exchange platform, Gemini Exchange, announced last week that it would lay off 10% of employees.

And cryptocurrency lending platform BlockFi said it was cutting around 20% of its workforce.

In public statements, companies have framed the cuts as necessary measures to deal with a change in economic conditions, amid concerns about rising interest rates and inflation.

US stocks plunged into a bear market this week.

The fear of recession is growing inside and outside the sector.

And cryptocurrencies, once considered a hedge against the stock market and inflation, have also plunged;

Bitcoin fell to just over $20,000 on Wednesday, from an all-time high of nearly $69,000 in November.

“It looks like we are entering a recession after a 10+ year economic boom,” Armstrong wrote in his email to Coinbase staff.

"A recession could lead to another crypto winter, and it could last for an extended period."

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In some cases, however, cryptocurrency executives are still trying to double down on their belief in the long-term potential of the market.

As many crypto believers will point out, there have been previous notable declines over the years, including bitcoin's 2018 crash and a May 2021 crash that wiped $1 trillion in market value in one week.

Some industry executives are emphasizing that crypto always bounces back.

"Constraint is the mother of innovation and tough times are a forced role for focus," Cameron and Tyler Winklevoss, the founders of Gemini, wrote to employees.

"The cryptocurrency revolution is underway and its impact will continue to be profound. But its trajectory has been anything but gradual or predictable."

Cryptocurrencies, from rapid growth to the brake

For many workers, the sudden cuts have been shocking and cast doubt on the future of the industry.

Hiring in the cryptocurrency sector doubled between November and April, with two of the three largest employers being Gemini and Coinbase, according to data from ManpowerGroup, a global recruitment firm.

Cryptocurrency companies raised $34 billion in funding worldwide in 2021, an eightfold increase from the previous year, according to data from consultancy PwC.

Many employees who were drawn to an industry that until recently seemed like a rocket ship are now left wondering if and when the good old days will return.

"I was very, very happy when I got the job, and now it's like I'm mourning the loss," said a recent graduate whose employment contract was terminated by Coinbase, who spoke on condition of anonymity for fear of career repercussions. .

Another Coinbase employee who just graduated from college said, “My heart sank.”

Although some of these recently laid-off workers are engineers who could be sued by other companies, they face the prospect of having to scramble to find new jobs at a difficult time for the tech sector.

At a time when corporate America is generally laying off fewer workers, tech and fintech companies have been hit by a surge in job cuts.

Tech companies laid off more than 4,000 people in May, 781% more than the total cuts between January and April, according to a report by Challenger, Gray and Christmas.

Fintech companies, meanwhile, saw a 268% increase in job cuts, according to the report.

The consequences for workers extend to crypto companies in other countries as well.

At Bitso, one of the largest exchanges in Mexico with more than four million users throughout Latin America, 80 employees were laid off at the end of May as a reaction to the falling markets.

Many of the affected workers were newly hired, according to employees.

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Executives "are afraid of losing money, and I completely understand that, but it shouldn't be acceptable to hire someone and fire them 40 days later," Murillo Bargas, a laid-off Bitso employee, told CNN Business.

“They should have seen this coming. The crypto winter is not news to anyone.”

"I was in a room with an employee who was hired a week ago, so he just did the onboarding stuff, and then the next week, he was fired," Lucas Ferreira, a now-ex-Bitso employee, told CNN Business.

"Our headcount decisions are made in the interest of our long-term business to better support our customers and our strategy as a company," a Bitso spokesperson told CNN Business.

A notable exception to the layoff trend is Binance.

The company announced 2,000 open positions on Wednesday in a tweet from CEO Changpeng Zhao, which seemed to take a hint at the spending of other crypto startups such as Coinbase and Crypto.com.

"It wasn't easy to say no to Super Bowl ads, stadium naming rights, big sponsorship deals a few months ago, but we did," Zhao wrote in the ad.

"We're going into this crypto winter from a position of strength, and there's really no way we're going to come out of the crypto winter in a weaker position," Brian Shroder, CEO of Binance's US arm, told CNN Business last week, ahead of the hiring announcement.

“In the last three days alone, we have interviewed six people from Coinbase and Gemini.”

As for when the crypto winter may end, that is anyone's guess.

"That's the beauty of cryptocurrencies: They literally end next week, or we could be on them for over a year," Shroder said.

Allison Morrow and Jordan Valinsky of CNN Business contributed to this report.

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