It’s time for adjustments: wave of layoffs on crypto platforms

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It's time for adjustments: wave of layoffs on crypto platforms

Bubble. After reaching record valuations, the prices of many tech companies have deflated. (Courtney Crow / New York Stock Exchange via AP)

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The drastic turnaround in equity markets complicates the plans of tech startups. Due to the lack of funding and the collapse of the cryptocurrency marketseveral very young companies, including the Buenbit platforms and the Mexican Bitso, they reduce staff and cool their expansion plans. The bad climate to finance new projects “does not only occur in the world of cryptocurrencies but in all types of sectors”, warn the market.

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Last week, the exchange Bitso has announced the dismissal of 80 employees of the 600 it has globally. The company operates in 35 countries. The measure has reached Argentina, considered one of the most promising markets. The fact is that Bitso received a large injection of capital from various private funds last year, in a context of abundant global liquidity and a scarcity of profitable alternatives for investors.

Days later, another cryptocurrency trading platform, Buenbit, announced the layoff of nearly half of its staff and the end of its ambitious regional expansion plan. The change of strategy, its founder and CEO Federico Ogue explained to Clarín, has nothing to do with the drop in the price of bitcoin or crypto: “Investors are asking us to prioritize business profitability before growth”, She said.

28 years old, Ogue founded Buenbit and until two weeks ago he was developing a very aggressive advertising campaign in the 3 countries where he has a preference: Argentina, Peru and Mexico. Ogue admits that the difficulty in obtaining funding forced him to redefine the strategy to focus on the efficiency of the operation.

“Any adjustment is painful, especially since we fired people of great value.”Ogue stressed. Experts agree that many startups in various fields face the difficulty of attracting new capital. “The logic of investing in companies with high growth potential has changed and today what matters is liquidity. That leaves many out, ”complains a former senior executive at a major crypto platform.

In this context, investors want results, not promises. Something similar, saving distances, happened with Argentine tech companies listed in New York. By chance, Mercado Libre once passed a $ 100 billion valuation, but then fell 60%.

The abundance of capital, on the other hand, has allowed the birth of new unicorns. According to a survey by consulting firm CB Insights, 249 startups in the region were valued at over $ 1 billion. Of that total, 6 are Argentines. From March 2021 to the present, Auth0, Aleph, Vercel, Mural, Bitfarms, Ualá and Tiendanube have emerged.

They are cycles. It’s much harder to be a unicorn today., sums up Ignacio Plaza, owner of the Drapper Cygnus fund. The expert adds that many valuations have been deflated and that what prevails today is uncertainty. “This is widespread and affects all sectors,” clarified Plaza. To evaluate a company, investors take into account certain parameters, such as the number of users or the operations it carries out. On this we calculate what could grow.

Fintech, crypto and e-commerce companies were all the rage during the pandemic. The change, connoisseurs agree, has to do with increasing the rates applied by many central banks to neutralize the high monetary issue. “The share of Coinbase, the largest crypto platform, was trading at US $ 400. At the height of the panic, it lost 90% of its value.”says Piazza.

The collapse hits everywhere. Electronic payments giant PayPal also announced cuts: it fired 83 employees from its Silicon Valley office and was looking to relocate 131 employees from its Irish office. These are all symptoms of a new scenario that is much more difficult to obtain funding. In both investment funds and the stock market.

Mariano Biocca, executive director of the Argentine Chamber of Fintechs, clarifies that “although it is a scenario that coincides with the decline in crypto assets, this is not the cause of the restructuring, but rather of the rise in rates”. The drop in bitcoin is also not harmless. The exchanges make it clear that when this happens, “the number of trades also falls.”

Source: Clarin

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