American Crypto Industry Faces Layoffs Amid Bitcoin Surge and ETF Milestones

This week, the American crypto industry saw some big highs and lows. Bitcoin got really close to its all-time high price. Meanwhile, crypto ETFs hit new milestones on Wall Street. Plus, the upcoming presidential election looks like it could boost the ecosystem, no matter who wins.

However, it wasn’t all good news. Major U.S. crypto employers faced tough times. On Tuesday, Consensys, a leading Ethereum software company, announced it would lay off 20% of its global workforce. Then, shortly after, DYdX, a decentralized crypto exchange in New York, cut its team by 35%. The next day, Kraken, one of the largest crypto exchanges in the U.S., slashed its workforce by 15%.

Coinbase also reported disappointing third-quarter results, missing its targets and seeing a drop in customer activity. So, what’s going on?

Experts suggest a mix of factors might be at play. There are short-term worries about the elections and regulations. But there are also deeper issues regarding the role of crypto-native companies in a space increasingly dominated by traditional finance giants.

As Alex Tapscott, managing director of digital assets at Ninepoint Partners, put it, “This is definitely the most bearish bull market of all time.”

While headlines about crypto's growth seem to pop up everywhere, that mainly applies to Bitcoin. Tapscott noted that Bitcoin is now “in a league of its own.”

Even Bitcoin's recent strength isn't necessarily helping the entire crypto industry. Owen Lau, a senior analyst at Oppenheimer & Co., pointed out, “Yeah, Bitcoin’s price went up a lot, but where did that inflow go? It’s going into traditional finance companies, as opposed to crypto-native companies.”

With major players like BlackRock buying billions in Bitcoin trades through their ETFs, crypto exchanges like Coinbase and Kraken are getting left behind. Companies tied to struggling cryptocurrencies like Ethereum, such as Consensys, are facing even tougher challenges.

Concerns about regulatory uncertainty and the upcoming presidential election are also cooling crypto activity and investment for now. Kristin Smith, CEO of the Blockchain Association, expressed optimism that either a Trump or Harris administration could bring clarity and support for crypto. However, she emphasized that the current SEC's tough stance has harmed businesses significantly, and that damage won’t be fixed until next year at the earliest.

“A lot of the capital is sitting on the sidelines, and is nervous about coming into this space until they see some more clarity,” Smith said. “So I do think the regulatory issues and the political issues are a big factor in all of this.”

This week, the Blockchain Association launched an initiative to track how much money leading crypto firms have spent on lawsuits initiated by the SEC. That figure has already topped $400 million. When Consensys announced its layoffs, CEO Joe Lubin linked those cuts to the “many millions of dollars” spent defending against the SEC in court.

Still, some experts believe that even if the U.S. government embraces the crypto industry, challenges will remain. Lau thinks the market is too crowded with centralized exchanges. He predicts that many will either fail or get acquired by traditional finance firms. “I don't know why the market would allow 200 exchanges in the world,” he said. “It doesn't make sense to me.”

Tapscott, meanwhile, believes it will take more than just removing SEC Chair Gary Gensler to spark a true crypto bull market. “It’s not just the election,” he said. “If you look at previous cycles, there’s always been some set of new applications or capabilities that got people really excited.”

He pointed to landmark innovations like decentralized applications (dapps) and NFTs, which drove crypto markets to unprecedented highs. “This time around, is there something that has galvanized people in quite the same way?” he asked. “I think the answer is, not yet.”

While the idea of politicians and Wall Street embracing crypto is exciting, Tapscott noted that it hasn’t been enough to kickstart a true industry-wide bull run. That excitement can’t replace the enthusiasm generated by a genuine new use case for blockchain technology.

On a different note, Strive Asset Management, co-founded by former Republican presidential candidate Vivek Ramaswamy, announced it’s embracing Bitcoin in Texas. With $1.7 billion in assets, the firm stated that a key part of its future will be “integrating Bitcoin into standard portfolios of everyday Americans,” as it moves its headquarters from Ohio to the Lone Star state.

Web3 film funding platform Decentralized Pictures (DCP) is teaming up with the creators of horror films “The Blair Witch Project” and “Host” to launch a funding opportunity for horror short filmmakers. They’re offering two separate grants of up to $25,000. This announcement was made alongside contributions from Eduardo Sanchez, co-director of “The Blair Witch Project,” and Jed Shepherd, writer-producer of “Host.”

Finally, Kalshi is focusing on crypto traders as the U.S. election approaches. The prediction market platform recently began accepting USDC stablecoin deposits, allowing U.S. traders to bet on the presidential election and various congressional races. This move has boosted betting volume on Kalshi and positions the startup to compete with established crypto-native prediction markets like Polymarket.