Crypto’s New Crisis | Coinbase Cuts Staff While Binance, Kraken, FTX Are Hiring

ON THE BRINK OF COLLAPSE

One of crypto’s largest lending platforms, Celsius Network, is struggling to stay solvent after freezing withdrawals amid market volatility last week. According to a Wednesday report from industry research firm Kaiko, the crypto bank, which managed approximately $12 billion in assets as of last month, suffered from a combination of poor risk management, bearish market conditions, and overexposure to staked ether (stETH), designed to be 1:1 redeemable for ETH. In recent days it has deviated from Ethereum’s native token, triggering concerns about its structure.

To advise on possible solutions for its financial difficulties, Celsius hired Texas-based Akin Gump Strauss Hauer & Feld LLP, the law firm behind the restructuring of Sears, Washington Mutual and a number of other banks, as well as banking giant Citigroup.

Investors are now concerned about a broader contagion as high-profile crypto hedge fund Three Arrows Capital (3AC), which similarly had exposure to stETH, is also believed to be battling its way through solvency.

ANOTHER TWO-YEAR BEAR MARKET AHEAD?

Bitcoin plummeted towards $20,000, hitting the low of $20,064, after the Federal Reserve announced a 75 basis point rate increase to the federal funds rate on Wednesday. As of Thursday afternoon, the asset is trading around $20,888. Top investors think we’re in for another painful, extended period of low prices. Alex Pack, a managing partner at Hack VC, a $200 million (assets) crypto venture fund, told Forbes the bear market could last one to two years—“...that’s what we are telling our portfolio companies—make sure you have two years of runway.” However, they also believe that the industry is in a stronger place now because there are more cryptocurrency use cases and users. Read the full take here.

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 4:00 p.m. on June 16, 2022.

BINANCE, KRAKEN, FTX GO ON HIRING SPREE WHILE COMPETITORS STRUGGLE

After rescinding offers and freezing hiring, the largest cryptocurrency exchange in the U.S., Coinbase, announced Tuesday that it had laid off 18% of its workforce, approximately 1,100 employees. In a blog post, CEO Brian Armstrong pointed to a possible recession and a need to “manage expenses and increase efficiency.” He also said the company “grew too quickly.” Competitors Crypto.com and Gemini had earlier announced staff cuts by 5% and 10%, respectively.

Meanwhile, Binance announced it would hire 2,000 new employees; Kraken said it would continue its initial hiring plans of onboarding at least 500 new employees this year. Billionaire CEO of FTX, Sam Bankman-Fried, tweeted the company “is going to keep growing as others cut jobs.”

BLOCKCHAIN 50 SPOTLIGHT

Fujitsu: The $32 billion (12-month sales) telecommunications and computer hardware company runs a blockchain innovation lab in Brussels with more than 40 clients—from a rice-trading startup to giant brewer Anheuser-Busch. The companies use the lab to test fresh ideas, backed by Fujitsu’s technical expertise. In November, for example, water purification firm Botanical Water Technologies started building a trading platform using Fujitsu’s in-house distributed ledger technology, which will allow sugar mills, distilleries and cola makers to sell or reuse the water they would normally discard during production. The platform, launching in April, will trace the water as it’s purified, sold and delivered, and give companies the option to donate a portion of their purified water to water-scarce communities.

ELSEWHERE

Following Celsius Freeze, U.S. Policymakers Are On High Alert For Crypto Systemic Contagion [The Block]

Galaxy’s Mike Novogratz Says Two-Thirds Of Crypto Hedge Funds Will Fail [Bloomberg]

Inside A Corporate Culture War Stoked By A Crypto CEO [The New York Times] 

Michael del Castillo
Senior Editor 
Forbes Digital Assets

Nina Bambysheva
Reporter
Forbes Money & Markets

Follow us on Twitter & Facebook