The labor markets for cryptocurrencies and tech are both in an odd place right now, though not in the same way.
Jerome Powell, the head of the Federal Reserve, makes it sound as though the labor market is doing well overall. He stated, The labor market is exceptionally strong, during an interview, earlier this month.
U.S. federal data initially seem to support that. Without considering agricultural workers, the Department of Labor reported that overall payroll employment increased by 517,000 in January. In general, unemployment rates held unchanged at 3.4%, continuing the gradual drop that has been occurring since October 2022. Among the sectors with increasing employment are construction, government, healthcare, and the hospitality sector.
Nevertheless, the statistics and headlines from the tech and cryptocurrency sectors depict a totally different picture. According to data, 2,806 employees were already affected by crypto layoffs in January alone. Considering that 6,820 crypto employees lost their jobs in the entire year of 2022, that is a significant figure. In other words, the number of crypto layoffs in 2023 exceeded 41% of all layoffs in 2022 in just one month.
Aside from Magic Eden, Polygon, Chainalysis, and Bittrex, other cryptocurrency companies that made significant personnel reductions in February included Huobi, Crypto.com, Coinbase, Gemini, Genesis, and Wyre.
“Quiet” Layoffs Trending
Yet, there are also some “quiet layoffs” taking place right now, according to Denise Carlin, Head of People at Web3 startup MPCH Labs.
Carlin said of crypto firms, “People are trying to quietly lay off,” adding that she was aware of two businesses that did so quietly and with sizable personnel reductions—one bidding farewell to almost 20% of its workforce.
Dan Eskow, the founder and talent partner of Web3 recruiting company Up Top Talent, claimed to have also observed instances of “quiet” layoffs at crypto startups.
Yeah, the DeFi company GSR Markets quickly jumps to mind, Eskow said.
Layoff Trigger Events
Many layoffs in the cryptocurrency sector over the past year have happened immediately after extraordinary, sector-shaking occurrences like the FTX bankruptcy filing in November 2022 and the Terra LUNA crash in May 2022.
The layoffs in January, though, don’t really have a single, obvious cause. What gives, then?
Due to persistent industry worries, such as the bankruptcy of Genesis, the closure of Gemini’s Earn program in the midst of its conflict with DCG, the termination of Kraken’s staking offering, and increased regulatory pressure in the U.S., the labor market has continued to tighten in the cryptocurrency sector. The same macroeconomic issues confronting major tech businesses also have an impact on cryptocurrencies.
Solana NFT Marketplace Magic Eden Experiences Layoffs and Loses 22 Workers. Although CEO Sundar Pichai’s decision to fire 12,000 employees in January did not affect Google’s Web3 team, the internet giant did fire entire software engineering teams and its Area 120 startup incubator team.
The majority of Google’s software developers were laid off, according to a layoff tracker created by Airtable software engineer Steven Zhang and former Airtable programmer Chris Talley. It’s interesting that crypto frequently hires for that level of experience.
Carlin stated, With crypto, we absolutely bias towards mid level, adding that this occurs frequently since junior talent requires too much training time and senior talent is in short supply.
Crypto vs. Big Tech
Is Web2 talent seeking to transition to Web3 as the crypto and traditional IT industries deal with recurring waves of layoffs?
While discussing the layoffs at Meta, Amazon, and Google, Eskow remarked, They see plenty of engineers coming from the FAANG layoffs that are clearly interested in these openings. But in actuality, now is not the time to switch from web2 to web3. Priority will be given to the crypto-native developers.
Eskow thinks that engineers with prior expertise in the crypto industry will be given preference, particularly if they also have links in Web3, because crypto demands specific knowledge and coding languages rarely used in traditional tech professions.
Comparing employment in crypto to recruiting in traditional technology is not an accurate comparison, according to Eskow, who also noted that the crypto labor market is a relatively small one where one’s network is highly important.
84% of job cuts last month were at crypto exchanges, according to data. Eskow conjectured that many crypto enterprises are smaller, which may be one of the reasons some laid-off trad tech workers are interested in exploring cryptocurrency.
In response to inquiry, Eskow said, He thinks after undergoing layoffs at big tech companies, they are hesitant to join another large corporation, so they look to the crypto startups for a change of environment.
Eskow has received referrals and outreach from current ex-Google veterans keen to get into crypto.
But, Carlin thinks the transition from Web2 to Web3 is a good one right now. Due to the relative “extremely junior” nature of the Web3 talent pool, she contends that qualified candidates still stand a chance of being hired.
The skill pool is very junior, which sets the Web3 labor market apart from the wider tech sector. Every year, more people enter the Web3 market, according to Carlin, who also noted that it’s challenging to recruit the most experienced talents.
Headhunters can help in this situation. During economic booms, Web3 recruiting has relied on the practice of “headhunting.”
In contrast to traditional big tech, which would be swamped with experienced applicants as a result of all these layoffs, Web3 is considerably more dependent on headhunting, according to Carlin.
Impacts of Artificial Intelligence
Nevertheless, now that the cryptocurrency market has stabilized, eager VCs looking for the next big thing in technology may be turning their attention elsewhere—toward artificial intelligence (AI).
FinBlock Staffing cofounder Clarence Thomas told that he has witnessed people pass up job offers because venture cash that was initially committed to a crypto startup ended up going to an AI firm instead.
Thomas told that, recently, one of its clients genuinely promised to finance a cryptocurrency wallet with roughly $5 million. A product manager was required. And he actually found them a unicorn for what they required. They ultimately did not receive the funding that was promised. The AI sector was the recipient of that financing.
According to Thomas, they have seen a lot of artificial intelligence stealing the investment cash away from crypto and blockchain, and that’s very much driving the hiring right now.
Who is Hiring
Eskow has observed a persistent need for Web3 talent in the DeFi industry. Other hiring experts, like Thomas, have been forced to shift their focus away from hiring cryptocurrency professionals as the market has become more bearish. FinBlock has expanded into hiring for the 5G communications sector in an effort to diversify.
Thomas, however, said that despite the slump, hedge funds focused on cryptocurrencies continue to hire.
Thomas saw a sharp increase in recent recruiting by them, notably for sales positions. “January and now February have witnessed the strongest demand since the new year in particular.”
The Future of Crypto Labor
For 2023, the work market for cryptocurrency is still hazy. Carlin told that it’s still being perceived as very volatile and high risk for young talent. She estimates that headcounts at crypto companies are back to where they were two to three years ago, but the industry now faces significant problems with public trust.
Jim Angel, an associate professor at Georgetown University who teaches undergrad and MBA courses on market structure, international financial regulation, and fintech, told that “the boom is over.” Firms that overgrew will continue to lay off employees.
According to Professor Angel, there are two crypto labor markets. One group consists of conventional tech and financial companies who are dipping their toes in the cryptocurrency waters while trying to constantly comply with regulators, such as Google or Mastercard. The others are what Angel refers to as “wildcat enterprises,” which are less worried about legislation and instead are advancing crypto technology and innovation at any cost.
There are many similarities between trading and tech companies, but given the industry’s volatility, crypto companies “tend to be looser and more fluid,” according to Angel. In this regard, they resemble startups where employees are prepared to work for low pay in the hopes of making it big as the business succeeds. If there are problems, the company moves on to the following potential project.
At Stanford’s Graduate School of Business (GSB), where two of the university’s most renowned law professors have ceased teaching and are now supporting and housing their son, former FTX CEO Sam Bankman-Fried, who is still under house arrest until his trial in October, is Jeffrey Pfeffer, a professor of organizational behavior. According to Pfeffer, “copycat behavior” may be to blame for some of the layoffs in the tech sector.
The IT industry layoffs are essentially a case of social contagion, when businesses copy other people’s behavior. As Pfeffer stated in an article in December, If you search for reasons why corporations do layoffs, the rationale is because everybody else is doing it. The professor conceded that some businesses may have over hired, but contends that this isn’t the underlying cause of layoffs because significant businesses like Meta are still making money.
Pfeffer, though, has a different perspective on crypto. Pfeffer wrote in an email, Crypto has a distinct problem—it is an industry founded on vapour, hope, and B.S. for the most part. It is difficult to predict whether it will survive as a result.
Angel, on the other hand, is more optimistic. According to Angel, the crypto labor market will follow cryptos in general. The worthless, flimsy items will vanish with those jobs, too. Similar to other financial organizations, the productive sides will develop and increase since there is a constant demand for crypto-savvy workers with technical, HR, accounting, marketing, and compliance abilities.
