Formerly of Facebook, Meta joins the growing list of technology companies laying off employees en masse. One wonders if cryptocurrency-related companies will be next to follow suit.
According to the Wall Street Journal, Meta plans “widespread layoffs” as early as this week. Economics International cites “insiders” who describe this wave of layoffs as one of the biggest in the tech sector.
Meta’s layoffs closely followed last week’s Twitter, when the platform’s new owner Elon Musk blatantly fired half of the staff.
Twitter had about 7,500 employees before Musk arrived, which means about 3,700 people have lost their jobs.
According to sources cited by The Wall Street Journal, the extent of Meta’s layoffs will be lower in percentage terms than what happened to Twitter. However, the number of people who will be unemployed may be much higher than that.
During the periodic balance sheet earnings presentation held last October 26, Meta CEO Mark Zuckerberg already hinted that management cuts would be implemented. On that occasion, the need to focus investments in “a small number of high-priority growth areas” was reiterated.
“This means that some teams will grow significantly, but other teams will have to sit out or downsize over the next year.” During the conference, Zuckerberg also added:
“From an aggregate perspective, we expect the organization to be about the same size or slightly smaller at the end of 2023 than it is today.”
The third quarter was not a good one for Meta investors, as the company lost more than $3.5 billion. The big loss is due in large part to the huge investments Meta has made in its metaverse-focused division, known as Reality Labs. According to partial balance sheet data, this division alone has incurred $9.4 billion in losses in its nine months of operation.
Meta’s suffering is only the tip of the iceberg, and the entire technology sector is currently facing great difficulties. The US technology sector has long been the thermometer for the global performance of stock markets.
Now is not the time to buy Big Tech stock
While this advice may sound contradictory, analysts warn that now is not the time to buy short technology stocks. This is also supported by CNBC economist Jim Cramer, citing technical analysis by expert Caroline Borodin. The analysis of the charts highlights the particular distress in which the tech sector finds itself.
Therefore, it is believed that Big Tech will not soon be able to recover from the abyss in which it is plunging, after the crisis that affected the entire year of 2020 and also a large part of the current year.
Will crypto companies follow suit?
The question now is whether cryptocurrency companies will follow the example of tech companies and announce layoffs. The relationship between the two productive sectors is well known, which largely share the same risk capital lenders, and trading often notes the similarities between the stock market and the cryptocurrency market.
Crypto companies are known to be very sensitive to the price performance of major cryptocurrencies. So, considering that the cryptocurrency market has been bearish for a year now, it is not entirely out of the question that companies revolving in this production area will also start laying off workers.
Layoffs at at least three crypto companies in November alone
So far, at least three major crypto companies announced in November that they would lay off between 10% and 30% of their employees. Widespread Twitter user Wu Blockchain reported this earlier this month.
Galaxy Digital, which is led by former financial investor Mike Novogratz, appears to be considering laying off “up to 20% of its workforce” even if the number isn’t final yet.
“We are always looking for the optimal team structure and strategy, and when they are ready, we will share our projects,” comments Galaxy Digital spokesperson Michael Worsthorn, who also admitted that the entire sector “continues to be grappled with macro phenomena.”
The second largest crypto company in the eye of the storm is BitMEX, the derivatives and spot product exchange, which recently laid off some of its employees although the percentage of employees left without a job was not announced.
Finally, Digital Currency Group (DCG), a large company with subsidiaries across various segments of the crypto sector, cut 10% of its workforce as part of the restructuring process. The layoffs were necessary, a company spokesperson explains, to prepare for “the next phase of expansion.”
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