Bitcoin is in its upswing, why is there a wave of layoffs in the crypto space?

Original author: Sander Lutz, Decrypt

Original translation: Plain Language Blockchain

The U.S. crypto industry had a lot to celebrate this week: Bitcoin was inches away from its all-time high, crypto ETFs hit a new milestone on Wall Street, and next week's presidential election looks set to boost the ecosystem regardless of win or lose.

However, you could hardly see that all this masked a tough week for the top U.S. crypto companies. On Tuesday, Ethereum software giant Consensys laid off 20% of its global staff. Hours later, New York-based decentralized crypto trading platform DYdX cut the size of its team by 35%. The next morning, Kraken, one of the largest crypto trading platforms in the United States, also laid off 15% of its employees.

As the week came to a close, Coinbase released disappointing third-quarter earnings that missed expectations and saw an overall decline in customer activity. What's going on?

Experts told Decrypt that there could be a variety of factors at play — from short-term election and regulatory-related anxieties that could be resolved quickly to deeper questions about the place of crypto-native companies in an industry increasingly dominated by traditional financial giants.

“This is absolutely the most bearish bull run in history,” Alex Tapscott, managing director of digital asset management at Ninepoint Partners, told Decrypt.

While bullish headlines about the cryptocurrency rally seem to be everywhere, the narrative really only applies to Bitcoin, which Tapscott said is “increasingly in a league of its own.”

Even Bitcoin’s strength no longer necessarily translates into gains for the crypto industry.

“Yes, the price of Bitcoin is up a lot, but where is all this money going?” Owen Lau, a senior analyst at investment firm Oppenheimer & Co., told Decrypt. “It’s going to traditional financial companies, not crypto-native companies.”

As Wall Street giants like BlackRock buy billions of dollars in Bitcoin trades through their trading desk traded funds, relying on brand trust and ultra-low fees, crypto trading platforms like Coinbase and Kraken have been left out in the cold, Lau said. Companies associated with weak cryptocurrencies like Ethereum, such as Consensys, have fared even worse, he added. (Disclaimer: Consensys is one of Decrypt’s 22 investors, but Decrypt is editorially independent.)

Concerns related to regulatory uncertainty and the upcoming presidential election are likely to have largely dampened crypto activity and investment — at least for now.

Kristin Smith, CEO of the Blockchain Association, told Decrypt that while she is optimistic that both the Trump and Harris administrations can bring regulatory clarity and support to the crypto industry, the SEC’s current hostility toward the industry has caused significant damage to business and will not be alleviated until at least next year.

“I think a lot of capital is still sitting on the sidelines and is nervous about entering this space until they see more clarity,” Smith said. “So I do think that regulatory concerns and political issues are a big factor in all of this.”

Earlier this week, the Blockchain Association launched an initiative to track how much money leading crypto companies have spent on lawsuits filed by the SEC. The group said the figure has exceeded $400 million. When Consensys announced a 20% layoff on Tuesday, CEO Joe Lubin said the layoffs were related to the “millions of dollars” Consensys spent defending itself in court.

Still, some experts insist that even if the U.S. government embraces the crypto industry, its woes won’t go away. Oppenheimer’s Law believes that the current landscape of crypto-native companies, especially CEXs, is too crowded, and many of these companies will eventually either die or be acquired by traditional financial companies.

“I don’t know why the market would allow 200 trading platforms in the world,” he said. “It doesn’t make sense to me.”

Meanwhile, Ninepoint’s Tapscott believes that simply removing SEC Chairman Gary Gensler is far from enough to unleash a true crypto bull run.

“This is not just about the election,” he said. “If you look at previous cycles, there’s always been some new application or new feature that gets people excited.”

Tapscott pointed to landmark innovations like decentralized applications (dapps) and NFTs that have driven crypto markets to unprecedented highs.

“Is there anything that’s going to excite people the same way it did before this time around?” he said. “I think the answer is, not yet.”

While the prospect of politicians and Wall Street embracing crypto is undoubtedly exciting, Tapscott added that the development is not enough to kickstart a true bull run in the industry, nor is it a substitute for the enthusiasm generated by real new blockchain use cases.

“How do you use this technology to do something that wasn’t possible before?” he said.

Original link