PORTLAND, OREGON (BLOOMBERG) - The crypto industry - white-hot last year as Bitcoin soared to a record and enthusiasm for everything from Bored Ape non-fungible tokens to decentralised finance and "play-to-earn" games propelled the entire market past US$3 trillion (S$4.1 trillion) - is feeling a chill.
Gemini Trust, the crypto business run by billionaire twins Cameron and Tyler Winklevoss, on Thursday (June 2) told staff of plans to slash the company's workforce by 10 per cent as trading across the industry slumps. Rain Financial - one of the Middle East's largest crypto exchanges, with big backers from Silicon Valley - also made cuts, laying off dozens of employees, according to people with direct knowledge of the matter.
Meanwhile, crypto exchange Coinbase Global, the largest US crypto exchange, said on Thursday that it will extend a hiring freeze for both new and existing positions for the "foreseeable future" and rescind a number of accepted job offers.
"This is where we are now, in the contraction phase that is settling into a period of stasis - what our industry refers to as 'crypto winter'," the Winklevoss brothers wrote in a memo sent to Gemini employees that was viewed by Bloomberg News. "This has all been further compounded by the current macroeconomic and geopolitical turmoil. We are not alone."
Cryptocurrency prices have declined this year from the highs reached in early November and have largely remained in the doldrums, with the market now less than half the size it was at its 2021 peak. It is only recently, though, that digital asset executives have begun to characterise the situation as a cyclical crypto winter, when token prices may stay depressed for months. During the crypto winter of 2018, layoffs permeated the industry.
Venture capitalists are still pumping money into crypto start-ups, with Andreessen Horowitz breaking records last week by raising a US$4.5 billion fund dedicated to crypto, and Binance's venture capital arm raising a US$500 million crypto fund.
But signs of cracks have begun to appear in recent weeks - particularly at exchanges, which typically see trading volume plunge during bear markets, when retail investors retreat.
Gemini is refocusing "only on products that are critical to our mission", according to the memo, with team leaders asked to assess their headcount based on "turbulent market conditions that are likely to persist for some time".
The Winklevoss twins - who are best known for the Hollywood depiction of their disputed role in founding Facebook in the movie The Social Network - were among crypto's early big-name believers and adopters. They started Gemini in 2014, and over time added a variety of services. As a privately held company, Gemini does not disclose its number of employees. LinkedIn lists about 1,000 people who may work there.
Late last year, Gemini said it raised US$400 million in a round of funding that valued the company at US$7.1 billion.
In another blow, Gemini is being sued by the United States' Commodity Futures Trading Commission (CFTC) for allegedly misleading the derivatives regulator in a bid to launch the first US-regulated Bitcoin futures contract.
The CFTC said on Thursday that Gemini "made false and misleading statements" from July to December 2017 about how it would prevent manipulation in Bitcoin prices that were to serve as a reference for the derivatives based on the cryptocurrency. In a lawsuit filed in federal court in Manhattan, the agency sought trading and registration bans, as well as fines.
Gemini misled the regulator about its efforts to prevent people from trading against themselves, the CFTC said. The alleged conduct happened just as Cboe Global Markets was preparing to launch the first Bitcoin futures contract on an exchange overseen by the regulator - a development that helped fuel a torrid rise in the world's biggest token.
The proposed Bitcoin futures contract "was particularly significant because it was to be among the first digital asset futures contracts listed on a designated contract market, at a time of fervent interest by market participants in obtaining exposure to Bitcoin through the derivatives markets", said the regulator.
Gemini vowed to fight the allegations. "We have an eight-year track-record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court," the firm said in a statement.