Hedge funds to start-ups, industry feels crypto pain


What a difference one year can make.

This time last year, bitcoin was cruising to $20,000, two trading exchanges launched bitcoin futures contracts, and a flurry of professionals were leaving big tech and traditional financial firms for the promise of new opportunities in the fast-growing cryptocurrency industry.

Fast forward 12 months, and bitcoin is trading around $3,300 while other cryptocurrencies have reversed course, weighing heavily on investor confidence and the industry.

Earlier this month, blockchain services company Consensus said it’s cutting 13 percent of its staff.

Steemit, a blockchain start-up, recently announced it’s laying off 70 percent of its workforce.

Exclusive data provided by AngelList Talent to CNBC shows a massive increase in the number of crypto-related jobs posted in 2017 followed by a slump in 2018. In fact, the number of new crypto job postings, as a percentage of all new job postings, peaked in early 2018 and has since been steadily on the decline.

Utilizing AngelList’s A-List platform to gauge interest in blockchain jobs, data shows about 40 percent of top job seekers listed blockchain among the industries they were most interested in joining in 2017, trailed by a drop-off in March 2018. Currently, just under 20 percent list blockchain as among their top three industries of professional interest.

“Many firms across the digital currency landscape hired aggressively throughout 2017 and early 2018 as the market rose, and it makes a ton of sense as to why firms are now having to downsize. It means that companies are making rational decisions, and not simply assuming that prices will recover in 2019,” said Michael Moro, CEO of Genesis Global Trading, to CNBC.

Another area of the digital currencies hemisphere – cryptocurrency hedge funds – are also feeling the pain.

Matthew Stover, CEO of MG Stover, tracks data on crypto hedge funds.

“We had five [funds] that already closed and one more planning to close at year-end. So that would be 6 percent of our crypto funds,” Stover told CNBC in an email.

Stover pointed out that most of the funds that are closing had very little capital and posted poor performance this year.

Despite the downturn in cryptocurrency prices, Stover is still expecting 12 new crypto funds to launch within the next couple of months.

While the sell-off in digital currencies had made investing in this new asset class more challenging, it hasn’t seemed to impact the larger funds like Polychain Capital and Blocktower Capital at this point.

CNBC reached out to both companies and did not receive responses.

Other funds like Morgan Creek Digital, which has $1 billion in assets under management, see the drop in cryptocurrency prices as an opportunity.

“While most people are going home or slowing down, we are getting more aggressive at Morgan Creek Digital. It is our belief that bear markets are the most attractive time to deploy capital or build companies.The work being done in the crypto industry today will pay off in prices and returns 2-3 years from now,” said Anthony Pompliano, founder of Morgan Creek Digital, to CNBC.

Institutional digital currency trading firm Genesis Global continues to expand.

“For Genesis specifically, we are continuing to grow even as the bear market lingers. In 2019, we are increasing head count in lending, technology, and operational support,” says Moro.

Coinbase, the largest cryptocurrency exchange, told CNBC it is also expecting to continue hiring in the new year.

“We’ve more than doubled our head count since June. We’re now at about 630 [full-time] employees and just over 1,000 if you include contractors. We also opened offices in Tokyo, Portland [Oregon] and Dublin this year,” said a Coinbase spokesperson to CNBC.

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