If you want a sense of how the crypto market is doing, look no further than first U.S. crypto industry company to go public, Coinbase.
There’s a profound difference in how the leading — but no longer top — U.S. cryptocurrency exchange talked the talk three weeks ago at its first-quarter earnings shareholders call on May 10 and how it walked the walk this week.
The day before that call, Coinbase said “the volatility in our financials … doesn’t faze us. Our investment in our business now is especially critical” in its earnings report. Shareholders, on the other hand, were definitely fazed, sending its stock price down 15% between the May 9 report for the first three months of 2022 and the May 10 shareholders’ call.
On the call itself, CEO Brian Armstrong had said, “we tend see the down period as a big opportunity because we’re greedy when others are fearful. We tend to be able to acquire great talent during those periods and others pivot, they get distracted, they get discouraged. And so, we tend to do our best work in a down period.”
See also: Coinbase May Be Unfazed By 80% Drop, but Investors Are Clearly Shaken
Take note of that part about rescinding accepted offers. It’s not the same as layoffs, but it’s not that far off, albeit on a smaller scale. However, it’s better than can be said for another leading U.S. exchange, Gemini, which announced on June 2 that it was laying off 10% of its workforce.
Winter Is Coming
In other words, crypto winter is coming, and with it the likely end of the industry’s free-spending ways. The first crypto winter, which hit in early 2018, lasted two and a half years, until October 2020.
It’s not limited to the U.S., either. Bitso, the largest crypto exchange in Latin America, laid off more than 10% of its 700-strong workforce, CoinDesk reported on May 26. And on June 2, Brazil’s largest exchange, Mercado Bitcoin, eliminated 80 staff positions. Argentinian exchange Buenbit chopped 45% two days earlier. Bahrain-based, Coinbase-backed Rain Financial cut dozens on June 2.
And on June 1, the head of bitcoin mining for Mike Novogratz’s crypto merchant bank Galaxy Digital, a top industry investor, told CoinDesk, “I think in the next six months or so we’ll probably see some M&A activity happen because some miners who got in the sector during the peak are just not going to be able to meet their requirements.”
This comes on the heels of a very aggressive marketing campaign by top exchanges like Coinbase, Sam Bankman-Fried’s FTX and Crypto.com — all of which shelled out some $7 million for 30-second Super Bowl ads aimed directly at growing their user bases.
Read more: Crypto Makes a Play for the Mainstream with Star-Studded Super Bowl Ads
That’s on top of FTX paying $135 million for 19-year naming rights to the stadium of basketball’s Miami Heat and sponsoring Formula 1’s Miami Grand Prix. Crypto.com, meanwhile, paid a staggering $700 million for a 20-year naming deal of the venue formerly known as Staples Center, home to the NBA’s L.A. Lakers, Los Angeles Clippers, the WNBA’s Los Angeles Sparks and hockey’s L.A. Kings, and hired Matt Damon as a spokesman.
Bankman-Fried came out of top of that spending spree aimed at raising FTX’s profile, according to crypto market data firm Kaiko, which reported on May 30 that its bitcoin trade volume surpassed that of longtime U.S. No. 1 Coinbase that month.
It worked. Despite Coinbase, crypto first Fortune 500 company, seeing an all-time high number of trades in May, far surpassing many other exchanges. But FTX’s average trade size was about $2,000, double Coinbase’s roughly $1,000 — and its market share of the key Bitcoin-US dollar spot market trade surging in May — growing “from 5% to 44% over the past 18 months” when compared to 10 other large exchanges, the report said.
So maybe there’s something to be said for spending money like water. But it may well be the case that the crypto tap is being turned off.