Crypto layoffs decreased by 80% in February; is the FTX contagion over?

Layoffs in the nascent crypto industry, which reached alarming heights towards the end of 2022 and early 2023, appear to have slowed down significantly over the past one month. 

Recall that we reported that around 2900 jobs were lost in the crypto workforce in the first month of the year despite bitcoin’s rise. Read here. Those numbers have significantly reduced, with an estimated 570 crypto employees dismissed in February.

The decrease is a stark contrast to the percentage of the workforce the crypto ecosystem had to let go in January, which poses the question if the Terra and FTX contagion, which has severely plagued the burgeoning space in the past nine months or thereabouts, is gradually fading.

Crypto layoffs in February

According to Cointelegraph figures which were reportedly compiled based on publicly reported layoffs, job cuts were spread across at least 12 companies over 28 days in February. However, layoffs in February were devoid of triple-digit crypto exchange layoffs that characterised January’s, such as the ones from Coinbase, Crypto.com and Huobi.

In February, workforce cuts noticeably came in double-digits, affecting blockchain analytics firms, blockchain/software development firms and others.

Some of the most notable crypto layoffs in February included Chainalysis, a blockchain analytics company, which laid off 44 of its 900 employees, representing 4.8% of its workforce. NFT company Dapper Labs and Ethereum-scaling platform Polygon Labs dismissed around 20% of staff due to ‘internal restructuring.’

According to a tweet on February 21, Polygon co-founder Sandeep Nailwal explained that the move resulted from unifying all its internal teams under Polygon Labs, leading to 100 jobs being cut. 

A big part of this strategy includes unifying all of our teams under Polygon Labs to drive more growth.

As part of this consolidation process, we’ve made the difficult decision to reduce our team by 20% impacting multiple teams and about 100 positions.

— Sandeep | Polygon 💜 Build Together! (@sandeepnailwal) February 21, 2023

Dapper Labs CEO Roham Gharegozlou on February 23 also confirmed another round of layoffs at his company following a first wave in November, noting it was part of a restructuring to improve focus and efficiency. 

Additionally, crypto analytics firms Elliptic and Messari had their share of layoffs; they cut 10% and 15% of staff, respectively. Messari founder Ryan Selkis tweeted on Feb 23 that the staff cuts were due to “market headwinds” and a restructuring of their internal teams. It is estimated to have impacted around 27 employees. Also, a spokesperson of Elliptic confirmed to DLNews on February 24 that the decision to lay off 20 employees was a move to tamp down operating expenses.

Other prominent crypto firms to announce headcount reductions in February are crypto exchange Bittrex, NFT marketplace Magic Eden, Fireblocks, software firm Protocol Labs and crypto media company The Block.

Layoff decrease in the tech space 

Further research shows that a reduction of staff layoffs, in February was not peculiar to the crypto space but across the general tech space. 

According to data from the layoff tracker Layoffs.fyi, there were a total of 24,572 employees laid off across 129 tech companies in February, down from 84,414 across 268 tech companies in January.

Recall that after the pandemic boom of a few years, technology companies ended 2022 and started 2023 with a bleak outlook. Across the sector, thousands of jobs were cut to correct the over-hiring of the Covid period and brace for what was branded a period of slower growth. 

Read also:

Would blockchain technology have prevented ‘irregularities’ in the 2023 Nigerian elections

But now, the ambience is gradually approaching a sense of normalcy after a long period of global economic downturn.

What next for crypto companies?

January was an overspill of Terra and FTX contagion. Crypto companies’ boards and venture capitalists went through 2022 results and decided to prepare for the worst.

However, there is now a bit of relief as the pace of layoffs in February appears to have slowed compared to January. The reason for this isn’t far-fetched, the economic downturn has outlived its effects, and there’s been some upward trajectory in the crypto market recently, which is a pointer to the fact that stability might be back. 

Subsequently, many layoffs shouldn’t come in handy because the current crypto companies team members are stretched, and so more layoffs would be cutting into their muscle. As we move deeper into the year, the industry will gradually move on from the bear markets, and crypto companies will continue to build great products.