Cryptocurrency companies are laying off employees in an effort to survive the nascent market’s biggest selloff to date.
Blockchain venture firm ConsenSys said Thursday it would cut 13% of its staff, days after announcing an overhaul of its business model. Steemit, a firm that runs a blockchain-based social network, last week laid off 70% of it staff, citing the crypto selloff. A number of smaller firms that raised money during the manic 2017 cryptocurrency rally have retrenched sharply or quietly closed.
Last year’s market boom fueled a hiring spree at hundreds of startups developing new uses for blockchain, the ledger technology that underpins bitcoin and other cryptocurrencies. The young industry funded the expansion with billions of dollars raised through initial coin offerings, a method of capital raising that involves creating and selling bitcoin-like tokens to the public.
Then the market cratered. Bitcoin is down more than 80% from its December 2017 high, and the total market value of all cryptocurrency, currently about $111 billion, has fallen 87% from its early January high of $827 billion. About 86% of the ICOs from 2017 are trading below their listing price, according to accounting firm Ernst & Young, while 30% have lost nearly all of their value.
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“As things get real we have to be a lean, business-minded organization,” said ConsenSys founder Joseph Lubin. The company operates as a development house for startups looking to build services on the Ethereum platform, providing services and support in exchange for equity stakes in the new firms.
ConsenSys didn’t turn a profit in 2017 and won’t be profitable this year, either. Mr. Lubin, who also co-founded Ethereum, said he was more focused on growth. ConsenSys didn’t demand concrete goals for its projects. The startups it funded weren’t expected to produce revenue or profits, or a measurable return on investment. Now, he said, they will be.
Mr. Lubin said the selloff hastened the reorganization but wasn’t the driving factor. Rather, it was competition from other startups and platforms and from established companies such as
Job seekers appear to be losing interest in the business. The number of searches on Indeed.com for jobs related to blockchain or cryptocurrency fell 3% in the 12 months through October. A year earlier, there was a 482% increase. The number of employers listing blockchain-related jobs is still rising, but at a much lower rate.
More established firms with backing from traditional venture-capital funds that have converted some of their gains to fiat currency seem to have fared better in the downturn, said Raman Shalupau, who started a jobs board called Crypto Jobs List in October 2017. Sales on his website are down this year, he said, though the number of job listings continues to grow.
Blockchain-based identity-verification firm Civic raised $33 million worth of cryptocurrency in its 2017 ICO, but founder and Chief Executive Vinny Lingham said it converted about 90% of that into U.S. dollars.
“We have plenty of runway,” he said.
Token Agency, which advises firms considering ICOs, has been forced to slim down after the market rout. Rob Behnke founded Token Agency in January 2017 with three employees when the ICO market was taking off and quickly expanded the firm to 20 employees.
The company often was paid in cryptocurrency, particularly ether, making it more sensitive to market moves. Mr. Behnke laid off 10 employees in May and more in the following months. Token Agency now has just four employees focused on traditional capital-raising services and advertising technology.
Mr. Behnke said he didn’t hedge properly against potential declines in ether, which has fallen more than 90% this year. “My biggest issue throughout was not having proper risk management,” he said. “We didn’t anticipate it would be this quick and abrupt.”
He said the downturn is raising pressure on the new crypto ecosystem to get revenue-generating products on the market.
“I think what’s going to turn this around is real products actually touching people,” Mr. Behnke said.