Following the rash of crypto downfalls of late, most notable of them being fledgling crypto hedge fund Three Arrows Capital's bankruptcy, Blockchain.com is attempting to stunt the blowback with layoffs across various divisions. The crypto startup announced today that it is laying off a total of 25% of its staff, the brunt of which will be felt in its Argentinian offices.
A loan of $270 million to the aforementioned 3AC is largely to blame for the current Blockchain.com layoffs. The firm is expecting to lose that capital, given that 3AC founders Zhu Su and Kyle Davies have since gone missing amid its liquidation process, plus much of the company's own assets were used on petty expenditures, such as bungalows and superyachts.
The Blockchain.com layoffs will consist largely of Argentinian staff, nearly 44%, while 26% will be felt in US offices and 16% in the UK, averaging around 150 cut roles. This downsizing comes on the heels of a recent hiring spree, despite several alternative crypto businesses outright pausing onboarding procedures and slashing roles, most prominent among them being BlockFi and Crypto.com.
Blockchain.com boasts "over $1 trillion in crypto transactions" on its website and likewise claims to be responsible for one-third of all bitcoin transactions across the industry. The startup was founded back in 2011 by Nicolas Cary, Peter Smith, Ben Reeves, and KSI, now wielding a valuation of $14 billion following a recent funding round held in March.
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The crypto winter, which many are coining the current phase in the industry, first kicked into motion following the depeg of TerraUSD. This event signaled a limitation in the underlying assets supporting Terra's sister coin, Luna, thus causing widespread investor panic and sweeping withdrawals. According to its bankruptcy filings, around April or May, 3AC purportedly invested anywhere between $200 to $600 million into Luna, right before the crypto's price dipped from $80 to mere cents on the dollar.
These tribulations felt from the collapse of TerraUSD, Luna, and 3AC have translated across the industry, afflicting several additional businesses in their wake. Beyond the Blockchain.com layoffs, the crypto disruptions have even led to bankruptcies, in the case of both Voyager Digital and Celsius. Coinbase, on the other hand, remains among the few firms to remain non-exposed to these failures, which has even led its own crypto to jump 14% on Wednesday, July 20.
Many in the crypto industry are fearing the worst, as even widespread layoffs are proving to have their own unintended consequences, such as even potential bankruptcy. According to Peter Cappelli, professor of management at University of Pennsylvania, "there is no evidence that cutting to improve profitability helps beyond the immediate, short-term accounting bump." Layoffs also tend to cause scrutiny in management, leading to a loss in engagement and motivation, on top of valuable talent.
