The recent weeks have seen a sharp drop in price across various cryptocurrencies. It has also led to a wave of dismissals across the industry, as some of the biggest companies in the region let talent go in the face of a grimmer outlook for virtual currencies.
The so-called crypto winter, which has seen the price of digital assets such as bitcoin and ethereum nose-dive to as low as 25% of their value in 2021, has led companies in the industry to massively restructure their operation in the face of a challenging scenario.
This month, 2TM — the holding company of Mercado bitcoin, a crypto unicorn and one of the largest in Latin America by valuation — laid off over 80 employees as it cited the need to adjust its operations dramatically.
“The changing global financial landscape, rising interest rates, and inflation have been having a major impact on technology-based companies,” the company said in a public statement.
High-profile acquisitions on ice
2TM became Brazil’s first sector unicorn company in 2021 after raising a total of $250 million in funding — with Softbank as a lead investor — and attaining a valuation north of $2 billion.
Just a few months ago, it discussed a potential acquisition by U.S.-based Coinbase, but negotiations were reportedly put on ice as the scenario dramatically changed over the past few weeks.
“There has been a dramatic change in context for these companies,” Ignacio Carballo, Crypto & Alternative Finance lead at Americas Market Intelligence, said.
“The biggest ones changed tack, and what they did was preserve economic sustainability mainly by cutting personnel and limiting investment projects.”
The decision from the Brazilian company came days after its competitor in Mexico, crypto exchange Bitso, laid off 80 employees, citing “long-term business strategy” concerns.
In Argentina, the Buenos-Aires-based Buenbit reduced its workforce by as much as 45% due to the “global overhaul” of the tech industry.
The effect in Latin America is part of a global trend, with even large companies such as Coinbase taking drastic actions regarding their staff, reducing as much as a fifth of their workforce.
Interest rates climb, sending crypto for tumble
Analysts argue that the main driver behind the collapse of the crypto world has been the rise in global interest rates, unleashing a flight to quality that has seen crypto as one of the greatest victims.
Before the price plunge, most firms in Latin America had taken aggressive personnel acquisition strategies last year, leading to a growing workforce. This came as companies hired new talent as they looked to launch ambitious expansions across Latin America.
In the face of the new scenario, most of those expansions are put on hold or canceled altogether. BuenBit, which operates in Argentina, Mexico, and Peru, said to Coindesk that plans to foray into Colombia and Brasil were no longer in the cards.
Carballo said there is a notable uncertainty surrounding the future of many of these companies.
“Several projects will disappear, others will be restructured, and the most solid ones will endure over time. In the medium term, however, it is very difficult to know when the market will stabilize.”
The industry’s fate will be driven by the demand for cryptocurrencies and services associated with blockchain and Decentralized Finance.
“The crypto world and the fintech ecosystem are relatively young and constantly growing sectors. The demand for new products and services by users will allow these sectors to continue growing,” Gabriel Berger, a Senior Financial Consultant at Adila Fin & Pay, said.
“When they do, they will need to find new talent. And in the tech industry, demand for qualified professionals is constant and growing.”
David Feliba is a Latin American business journalist with expertise in capital markets, banking, and financial technology. His work includes interviews with top executives and policymakers in the region and coverage of banking and fintech trends. He has reported from multiple countries across the Americas and has covered conferences both locally and abroad.
Over the past years, his features have been frequently published in leading local and international news outlets. Some of it can be read at his personal site.
He lives in Buenos Aires.