The cryptocurrency meltdown which is wreaking havoc among investors with its bear run is forcing startups to close down their shutters and call it a day, reports Economic Times. The software-development community had generated over 1,000 digital coins in hopes of getting rid of the traditional financial systems and instant wealth.
A startup, which worked in the development of the cryptocurrency Ethereum Classic, called ETCDEV, announced this week that it is shutting down its operations due to a funding crunch. Ethereum is presently among the top 20 coins with a market capitalization of about $400 million. Another New York-based crypto startup ConsenSys reportedly will be cutting down its workforce to about 13 percent.
Companies are used to keeping a portion of their funds in digital assets as they were preferred means of exchange in the world of cryptocurrencies. With the cryptos losing their values in an unprecedented manner, companies find themselves with thin wallets and lack of any alternate financial resources.
ETCDEV realized that they were deep in crisis after the November debacle and all of their employees are now suddenly without work. “I am sure if that happened a year ago, that wouldn’t be a problem at all, a year ago there was a lot of free money in the market. But in a bear market there’s a change,” explains Igor Artamanov, founder of ETCDEV in an interview.
Economic Times reports that these startups aren’t the only ones who have been taking the heat due to the crypto crash. SpankChain, an adult entertainment site, has downsized to eight employees from twelve recently, according to a tweet from CEO Ameen Soleimani. In late November, Steemit Inc. announced via blog post that it laid off 70 percent of its workforce.
According to CoinDesk, 1,180 crypto startups have been funded by venture capitalists since 2012. It is estimated to the tune of more than $5.6 billion. Based on historical comparisons global director of fintech strategy at Autonomous Research, Lex Sokolin indicated that the pricing pressure on digital assets in 2018 is likely to lead to 25⎯50 percent shutdowns and layoffs for current projects.
Martha Bennet, principal analyst at Forrester Research told the Economic Times that many startups had trouble getting to a viable product and many others’ business models didn’t hold up like that of Giga Watt. Giga Watt, a Washington-based company that provides hosting services for people wishing to mine cryptocurrencies filed for bankruptcy in November as they couldn’t cover costs when Bitcoin’s price plunged.
“The crypto crash acted as both catalyst and wake-up call,” signs off Bennet.
