- Chainalysis lays off 5% of its staff in a reorganization as a move to weather the effects of the crypto winter.
- The cut will see some of the employees being transferred to other departments while others will be left unemployed.
- The company still insists that it is well-capitalized and will expand its teams under a refocused strategy later this year.
Chainalysis Inc. intends to lay off under 5% of its 900 staff members as part of its reorganization amidst the crypto winter. The company, whose function is to detect illegal activity in the crypto industry through data analysis, said that this dismissal would mainly affect its “go-to-market” team, mostly populated by sales and marketing personnel.
Maddie Kennedy, the company’s senior director of communications, explained that some of the affected people would be transferred to other teams or areas of the company while others would be let go. She said, “As a part of this reorg, some folks will have new roles, responsibilities, and reporting lines,” adding, “Unfortunately, we will also part ways with some incredibly talented people within our team.”
This is unfortunate because earlier in January at the World Economic Forum in Davos, Chainalysis CEO Michael Gronager said during an interview that the company is looking to increase its workforce by roughly 11% as part of a worldwide expansion that might involve additional acquisitions.
However, Maddie Kennedy said that the changes are part of a more extensive reorganization and affirmed that the company is well-capitalized, with plans to expand its teams under a refocused strategy this year.
Chainalysis, founded in 2014, has acquired recognition for its work with the US and other agencies, such as the Securities and Exchange Commission and the Federal Bureau of Investigation, on crypto-related investigations. This endeavor has accelerated in the last year due to high-profile bankruptcies and collapses in the crypto sector, ranging from the FTX crypto exchange and Three Arrows Capital. Still, it is not enough to keep the company standing.
The Layoffs Era
Chainalysis is not the first firm to lay off its staff, and based on the ongoing trend in the industry, it will be the first. The crypto markets have been highly volatile following the catastrophic collapse and bankruptcy of cryptocurrency exchange FTX Trading Ltd which came after a boom cycle in 2021 that saw companies hire more to manage the increase in business.
However, the collapse led to falling trade volumes and significantly reduced demand for cryptocurrency services. Such conditions would damage Chainalysis since its revenue model primarily relies on transaction volumes and demand. This has been the case for many other companies in the industry, such as Huobi, Crypto.com, and even tech firms like Google, Amazon, and Microsoft.
Kraken, for instance, a veteran among crypto exchanges, announced in November their decision to let go of 30% of their employees, that was 1100 people, to ‘adapt to the current market conditions. The firm acknowledged that it employed more staff during the crypto market peak to meet demand and ascertained that it would only scale down to the size they were a year prior.
On the other hand, Gemini exchange, owned by the Winklevoss twins, had its third layoff that saw 10% of its staff go home in January. Cameron Winklevoss, Gemini’s co-founder and president, cited in an internal memo that the employee layoffs were caused by a mix of macroeconomic issues and unscrupulous actors in the cryptocurrency business. He said:
“We hoped to avoid further reductions after this summer. However, persistent negative macroeconomic conditions and unprecedented fraud perpetuated by bad actors in our industry have left us with no choice but to revise our outlook and further reduce headcount.”