Two Crypto Firms Announce New Layoffs: What’s Happening?

Two crypto companies, dYdX and ConsenSys, announced a new round of layoffs. What’s going on and why are American regulators to blame for this?

Antonio Juliano, CEO of decentralized derivatives exchange dYdX, announced that he will make a 35% layoff. He thanked former employees for their work and explained the layoffs as a need to “revitalize” the stock market because, in its current form, it is “not the company dYdX should be.”

“I’ve seen it over and over again, and I’ll continue to see it. What we’re building is much bigger than a company, and you’ll always be a part of it.”

The layoffs at dYdX in particular came shortly after ConsenSys reduced its staff by 20%. ConsenSys CEO Joseph Lubin cited adverse macroeconomic conditions, uncertainty regarding crypto regulation in the US, and the cost of a legal fight with the Securities and Exchange Commission (SEC).

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Broader macroeconomic conditions and ongoing regulatory uncertainty over the past year have created major challenges for our industry, particularly US-based companies.

— Joseph Lubin (@ethereumJoseph) 29 October 2024

Lubin also noted that the company’s financial situation is stable.

According to him, ConsenSys will focus on key revenue drivers that are in line with the strategy it has adopted previously. The company’s flagship products MetaMask and the second-layer Ethereum network Linea will form the basis of further development.

The ConsenSys CEO also said laid-off employees will receive support such as severance pay, assistance with future employment and expanded health benefits based on length of service after leaving the company.

Lubin also told Fortune that the layoffs will affect about 162 of the 828 employees across all Consensys divisions. ConsenSys is the leader in layoffs in 2024, according to Layoffs.fyi.

Why is the SEC guilty of the worst again?

In his layoff statement, Lubin cited the SEC as one of the reasons he laid off staff. In June, the regulator sued the developer of the MetaMask wallet, stating that the company had violated the law through its MetaMask Staking service.

The lawsuit comes shortly after ConsenSys filed a lawsuit against the SEC and five unnamed employees for “ETH oversight,” asking the court to formally approve language that would not classify the asset as a security.

As a result, the SEC’s Enforcement Division closed its investigation into Ethereum 2.0. The agency took this step after the organization sent a letter seeking clarification on the asset class while approving the spot Ethereum ETF. However, continued litigation over the SEC’s allegations leaves ConsenSys facing legal costs.

The layoffs come as the market bucks trends

In particular, the crypto market was booming at the time of the layoff announcement, which is generally considered a good time for crypto companies. Thus, on October 29, the Bitcoin (BTC) exchange rate rose from $70,000 to just over $73,600 and approached its historical maximum of $73,777. Since the beginning of the month, the cryptocurrency’s value has increased by 12%. Analysts associate this trend with predictions for the US presidential election.

Bitcoin price. Source: crypto.news

Interestingly, Bitcoin’s growth is also explained by the situation in the USA, which ConsenSys CEO previously complained about by announcing layoffs.

The growth in Bitcoin price is due to various factors. Interest in Bitcoin ETFs, especially from large companies such as BlackRock, is increasing, attracting significant investments. Recently, the US saw an inflow of $2.7 billion into Bitcoin ETFs, which helped attract new investors and push the price higher.

In addition, the desire to protect against inflation also significantly affects the market. Against the weakening dollar and rising inflation, many investors are turning to limited assets such as Bitcoin to protect their savings.

dYdX cuts headcount as rivals gain momentum

Since the beginning of the year, the crypto market has been recovering after a long crypto winter, with many exchanges accelerating growth. According to Bloomberg, Crypto.com, Binance, Coinbase, Gemini and Kraken are hiring as cryptocurrencies like Bitcoin, but not dYdX, rise.

In announcing the personnel reduction, Juliano stated that the trade in its current form was different from what it should be, without specifying exactly what he meant. But further development will require human capital that can revitalize the platform. Therefore, announcing a 35% staff reduction in an environment where crypto exchanges are trying to make the most of the current rally seems counterintuitive to say the least, but Juliano isn’t too worried about FOMO.

How have the dynamics of layoffs changed in the crypto industry?

According to Layoffs.fyi, the first quarter of 2023 was the peak year for layoffs since 2020, when more than 167,000 employees lost their jobs. But in 2024, the situation looks much better: The peak of layoffs occurred in the first quarter, with 57,000 employees losing their jobs. There were even fewer layoffs in the second and third quarters; 43,000 and 38,000 respectively.

Source: layoffs.fyi

Thus, the story of dYdX and ConsenSys has become an exception to the rule rather than a typical trend for 2024. After mass layoffs in 2022 and 2023, the blockchain job market appears to be recovering.