Crypto Update: Company capitulation

Crypto Update: Company capitulation

Cryptocurrencies 4 minutes to read
Jacob Pouncey

Cryptocurrency analyst, Saxo Bank Group

Summary:  Cryptocurrency firms are cutting costs and closing doors as market conditions weigh on mining profitability and prices continue to slide lower into year-end.


This week the entire crypto market cap fell by 11% to around $110 billion. Additionally, Bitcoin and Ethereum fell around 10% and 15% respectively. Bitcoin seems to be consolidating around the $3,500 level before making its next move.

Companies are cutting staff and costs

Notable companies in the cryptocurrency sector are drastically reducing costs and staff after the collapse in the crypto market. Ethereum co-founder Joe Lubin has said his firm ConsenSys would begin cutting costs and restructuring under the current market conditions. The firm, which is self-funded by Lubin, builds out technologies and applications built on the Ethereum network. The downturn in Ethereum has led the firm to reconsider its strategy. Additionally, the crypto mining giant Bitmain has shuttered its R&D branch based in Israel, laying off over 20 staff members. These two firms are representative of an industry under pressure from declining crypto prices.

Crypto-lawsuit

In an unprecedented move, bitcoin cash mining firm United American Corp. is suing Bitmain, Bitcoin.com, Roger Ver, and Kraken. The firm alleges that the defendants schemed to take over the open source Bitcoin Cash network. This is particularly interesting because the Bitcoin Cash network is an open source software not controlled by any individual actor. There is a lot of nuances in the argument, so depending on how this plays out in court, it could set a precedent in the US legal system before the actual understanding of how these networks are governed. If the majority of the computing power can be legally liable to the minority of miners, this could set back the pace of innovation in public blockchains.

Short-term selling pressure continues

The Bitcoin market is suffering selling from three sides of the market. First, individuals who bought in last year are sitting with losses unable to stomach the drop from the USD 6k mark over a month ago. Secondly, crypto businesses and institutions are forced to sell due to decreased profits from crypto. Some crypto-focused funds may be facing redemptions, and some individuals may be selling for tax purposes. Lastly miners, not only must sell to cover electricity cost for the period, but many are short-selling cryptocurrency on the market. This leads to further decline in price as many miners are borrowing cryptocurrency to sell in the markets thus providing selling pressure to the very thing they would like to see increase in price.
XBTUSD

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992