Bitcoin rally masks bleaker picture emerging in cryptocurrency world

Beyond Bitcoin's rally toward another all-time high and renewed ETF inflows, a bleaker picture of crypto is emerging, one where waning interest in once-hot assets prompts some companies to slash jobs.

On Wednesday, crypto exchange Kraken announced job cuts a person familiar with the matter said amounts to 15% of workers, while rival Coinbase Inc. reported earnings that missed estimates. Software developer Consensys is among other digital-asset firms that recently started trimming jobs.

Such cuts fly in the face of Bitcoin's recent strength and industry optimism that Donald Trump, a crypto convert, will soon be in the White House again. At the same time, many blockchains that were touted as Bitcoin alternatives have languished, and fundraising by crypto startups slumped in the third quarter by one estimate.

"It has been a Bitcoin-dominant market this cycle," said Toby Lewis, co-founder of OrdinalsBot. "The hope of the wider crypto industry is that this will rotate into alternative coins, but this has taken longer than many expected."

A look at performance among top cryptocurrencies this year drives home the industry bifurcation. Bitcoin is up some 64% since Jan. 1, and Solana has posted similar gains. Dogecoin, the memecoin associated with Elon Musk, the world's richest person and a staunch Trump supporter, has rallied almost 80%.

Meanwhile, so-called altcoins like Polkadot, Polygon and Algorand have gotten hammered.

Bitcoin, the original cryptocurrency, was always the poster child for the sector's booms and busts. But the hugely successful introduction of US exchange-traded funds backed by Bitcoin in January set the stage for its adoption on Wall Street, and the impact has been widely felt. BlackRock Inc.'s iShares Bitcoin Trust now oversees $31 billion after drawing nearly $900 million of inflows on Wednesday alone.

The spoils haven't flowed to all corners of crypto. Venture capital investment in digital-asset startups tumbled 20% in the third quarter from the prior three months, to $2.4 billion, according to Galaxy. VC deals remain a far way off the go-go days or the 2021 bull market, showing how confidence has yet to fully recover from the crash that followed.

Other areas of crypto, like nonfungible tokens and blockchain-based gaming, never fully recovered from the crisis that ravaged the industry two years ago.

Crypto exchanges are a good barometer of overall industry health because they typically list hundreds of tokens big and small. Coinbase, the biggest US platform, missed on both revenue and profit for the third quarter, sending the stock plunging as much as 15% on Thursday.

Kraken, which announced its job cuts in a blog post on Wednesday, said it's making "organizational discipline decisions" to eliminate redundant management layers. As part of the C-suit reshuffle, its chief technology officer and chief product officer have left the company, and it appointed a new finance chief.