With ‘Bitcoin winter’, exchanges lay off dozens of employees

  • A sequence of shutdowns has been taking place in 2021, including in national “unicorns” (startups valued at US$ 1 billion), such as Vtex, Olist, QuintoAndar, Loft and LivUp
  • The crypto segment is still suffering from what is already called the ‘bitcoin winter’ – a bearish phase that has lasted nine months and deepened in May.

By Aramis Merki II – The innovative world of crypto-assets has taken on a less promising tone in the last two weeks – and not because bitcoin, the “symbol” currency of this universe, has lost half its value since September 2021.

In place of headlines about millionaire investments and growth prospects, the news showed mass layoffs at two of the most important cryptocurrency trading companies in Latin America: Grupo 2TM, owner of the Bitcoin Market, and Bitso.

The cuts indicate that crypto exchanges, also called exchanges, have not escaped the problem that has long been seen in other tech companies. A sequence of shutdowns has been taking place in 2021, including in national “unicorns” (startups valued at US$ 1 billion), such as Vtex, Olist, QuintoAndar, Loft and LivUp.

The crypto segment is still suffering from what is already called the ‘bitcoin winter’ – a nine-month bearish phase that deepened in May. The currency – which has become synonymous with crypto for many – is the gateway to this entire market, and exchanges are the way to access it. “These companies are suffering doubly. With bitcoin’s downturn and the problem for the entire tech sector,” says Dan Yamamura, partner at venture fund Fuse Capital.

The layoffs are a measure by exchanges to readjust the route in the face of the global inflation and high interest environment, which is keeping money away from risky investments. In Yamamura’s analysis, startups in general become concerned with preserving cash in this cloudy moment. “The company that received a contribution thinks about stretching the cash as much as possible. The phase of taking the money and doing as much as possible with it is over,” he says.

For Venture Capital focused on the crypto sector, the moment is of attention, even with the knowledge that the volatility in the segment is very high. In the first quarter, global investments in blockchain technology-related companies totaled $9.2 billion, according to the CB Insights platform. It was the seventh consecutive quarterly increase, “while most other Venture Capital sectors saw declines,” according to the report.

The phase of distributing money to startups and increasing the probability of achieving great successes is over. With more “small” money, the shots need to be accurate. This applies to both funds and projects within exchanges that have started to look for different businesses to differentiate themselves. The side effect of this, in Yamamura’s view, is that the projects that will receive money will be the most prepared and promising.

In addition to the difficulties that have mounted for growth companies, the niche of crypto exchanges has seen competition grow aggressively. The main service provided, buying and selling digital assets, needs scale to really be worth it. Therefore, many of the exchanges were trying to open new fronts, looking for better margins.

An expert in the sector comments that even promising segments, such as tokenization and the sale of NFTs, have added complexity to the management of these companies. “Often, the idea is very good, but it comes up against a lot of challenges. It’s hard to scale quickly and always innovate,” he says.

Mercado Bitcoin and Bitso lay off 170 in total

On Wednesday (1), the 2TM group laid off 90 of the approximately 750 employees. The company said in a note that the economic scenario required “adjustments that go beyond reducing operating expenses”, leading to the shutdowns. “The change in the global financial scenario, high interest rates and inflation, has had a great impact on technology-based companies. This new reality requires that 2TM also seek a new growth and investment equation”, points out a note from the holding.

A source close to the company says that the adjustment was necessary for the projects to “continue to move forward”. The company raised about US$ 250 million between the middle and the end of last year. Among the group’s new releases is a football team that will be managed in the metaverse, with administrative decisions taken by the holders of a token. At the same time, however, Mercado Bitcoin withdrew its sponsorship of Corinthians.

Bitso laid off 80 people on May 26, out of a total of 700 employees it had until then. The Mexican company was the first crypto unicorn in Latin America after receiving a contribution of US$ 250 million in May 2021. The cuts were in all operations of the company, which has been operating in Brazil since last year and also in Colombia and Argentina.

Even with the cuts, Bitso keeps publishing more than 40 vacancies on its website, including for Brazil. In a note issued on the date of the layoffs, the company stated that the decision was made considering the long-term needs of the business. “We work in a fast-paced industry that requires us to constantly take stock of our skills so that we can move even faster to where our customers want us to be,” the note states.