Shapeshift — currently one of the largest and most popular digital asset exchanges — has become the latest in an ever-increasing list of crypto companies down-sizing as a result of a harsh 2018.
In Shapeshift’s most recent blog post, company CEO Erik Vorhees highlights the reasons and rationale behind axing 37 team members — reducing the size of the team by a third.
Despite growing by around 3,000 percent in 2017 as the cryptocurrency markets witnessed an incredible bull run, the instant currency exchange was unable to maintain its momentum into 2018 — crashing instead alongside the crypto markets.
With a heavy heart, today we laid off 37 people. We've published a blog on this, also discussing some of our missteps and lessons as a company. "Overcoming ShapeShift’s Crypto Winter and the Path Ahead" by @ShapeShift_io https://t.co/1eNT54eyPp #bitcoin
— Erik Voorhees (@ErikVoorhees) January 8, 2019
However, the turning tides of the market are just one of many reasons to blame for the move, with the company CEO admitting that the company had made a thousand mistakes.
One of the major causes of its difficulties in 2018 was that Shapeshift simply grew too fast. According to Vorhees, by the time the company had grown comfortable with managing a small team, it already had a medium sized one. Once it had learned to manage that, the team size ballooned even further.
Additionally, an overambitious expansion strategy, which saw the company acquire KeepKey — a hardware wallet manufacturer — and create CoinCap to display live crypto market data, proved to be too much to handle.
In addition to this, the platform had several other projects under development, including a number of plugins and APIs — stretching company resources, diverting talent, and fracturing the attention of the executive team.
As with all things, increased success comes with increased scrutiny — a lesson that Shapeshift learned the hard way. As the company began exploring the changing regulatory environment, it faced mounting legal costs and risk assessments, which diverted resources away from areas that needed it.
Perhaps one of the major mistakes made by the company was the implementation of full KYC requirements, essentially nullifying one of its original major selling points: privacy. While this may have helped the move the platform out of the grey area it was previously operating in, the move was not taken well by its users.
In 2018, Shapeshift also began to face increasing competition from the likes of Payfair and Vertpig, which do not require KYC to use their services. It also lost many of its most important API partners, significantly reducing both the visibility of the service and the volume it handles.
Combine all of this with the fact that the majority of the company assets were held as volatile digital assets and you have a recipe for disaster. With expenses ballooning out of control, reduced customer interest, and a quickly depreciating bankroll, it was just a matter of time before the company reached a breaking point.
What do you think the future has in store for Shapeshift? Will it ever regain its former glory, or will it continue to be outcompeted by less restrictive upstarts? Let us know your thoughts in the comments below!
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