Bitcoin Bear Market – Centralized Exchange Platforms Take the Hit and Make Massive Layoffs.
Bankruptcies are possible, and it is urgent to take possession of your private keys.
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A Bear Market usually consists of 7 distinct phases. In all likelihood, we are currently still between phases 4 and 5. We are between panic and accumulation/stabilization. Looking at the current state of the Bitcoin Fear & Greed Index, it is still the panic phase that is predominant:
This is a game-changer for the entire cryptocurrency ecosystem, of which Bitcoin is the undisputed king. The Bear Market of Bitcoin and cryptocurrencies is taking place in a complicated macroeconomic context where investors' risk aversion is reaching new heights. The war in Ukraine, inflation and central bank monetary policy tightening are all contributing to a great deal of uncertainty for investors in the months ahead.
Bitcoin is now just around $20K. Its lowest level since late 2020. The price of Bitcoin even fell back below the ATH of year-end 2017 to hit a low of $17.7K. This storm is causing shares of publicly-traded companies in the sector to fall. For example, Coinbase has plunged more than 85% since its ATH at the end of 2021 when the price of Bitcoin touched an ATH of $69K :
The American giant of the sector now weighs only $11.8B.
This pushes the platform to review its strategy for the coming months. Brian Armstrong, the CEO, and founder has just announced the elimination of 18% of Coinbase's workforce or about 1,100 employees:
“It looks like we are entering a recession after an economic boom of over a decade. This difficult decision was made to ensure we stay healthy during this downturn.”
Since the beginning of 2021, it must be said that Coinbase had experienced meteoric growth in its workforce, from 1,250 employees to over 6,000. To defend himself, Brian Armstrong explains that Coinbase has grown too fast. The platform probably got carried away by the euphoria surrounding the Bitcoin Bull Market and its IPO in April 2021.
Coinbase reported a net loss of $430 million in the first quarter of 2022. On Wall Street, Coinbase's valuation has therefore been divided by five since January 2022.
Over the past fortnight, the market collapse has prompted several industry giants to slash their payrolls. Before Coinbase, the company Gemini, founded by the Winklevoss twin brothers, announced the layoff of more than 1,000 employees, or 10% of its workforce.
The same is true of the American platforms BlockFi and Crypto.com, which are cutting 20% and 5% of their staff respectively. In Latin America, Buenbit has chosen to fire half of its employees, while Mercado Bitcoin has reduced its payroll by 15%.
The major players are facing a sharp decline in cryptocurrency trading volumes due to investor caution. Since the beginning of the year, the global market has lost two-thirds of its value, or $2,000 billion. Analysts now fear “a day without end”, with cascading bankruptcies. The market is in a configuration that coincides with the worst phases of decline. Historically, it can last from 8 to 24 months before a rebound. A further price drop of 40% to 64% is possible and even long-term investors are already suffering significant losses.
Now, only the giant Binance says it is determined to weather the storm without sacrificing any of its workforce. At the big American crypto event Consensus 2022 held in Austin last week, its CEO, Changpeng Zhao, even announced “new hires in the coming weeks”.
Final Thoughts
Beyond the cryptocurrency sector, it is the entire tech ecosystem that is heavily hemmed in. Many startups have announced massive layoff plans in recent weeks, such as the quick commerce specialist Gorillas or the Swedish fintech Klarna. While giants like Meta, Snapchat, Uber, and Lyft have, for their part, reduced the pace of their hiring.
This Bear Market will allow the sector to clean up the less solid companies that have not been careful enough when growing. It is thus an important moment it seems to me to remind you once again that you should take possession of your Bitcoin's private keys, while the bankruptcies of some of the platforms like Coinbase could lead to a blocking of withdrawals and then using the cryptocurrency assets to pay back the company's investors or creditors.
In short, users will lose the fruits of their labor and be the last to be served. Remember the golden rule of Bitcoin: Not your Keys, Not your Bitcoin. This will allow you to fully protect yourself.
Some reading
Project MiCA – EU Continues To Show Its Incompetence With a Disastrous Agreement on Cryptocurrency. A temporary agreement that most European politicians dream of making permanent.
Here Is Why the G7 Ban on Russian Gold Is a Game-Changer, Even for Bitcoiners. This ban brings us closer to the scenario long anticipated by gold bugs.
Always a Contrarian, Michael Burry Predicts a Bullwhip Effect in the Months to Come. Some of the economic data in America point in his direction.
The Inconvenient Truth for BTC Haters – Bitcoin Uses 56x Less Energy Than the Legacy System. With Lightning Network, a Bitcoin payment becomes 194 Million X more energy efficient than a classical payment.
Mid-Year Review 2022 – 10 Lessons for the Financial Markets. The hardest part is probably still to come.
The shake out was inevitable, just as it is in the equities market. Fire up that ledger and move your crypto out of danger, sound advice.