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The American crypto landscape looks like a paradox this week. Bitcoin nearly shattered its all-time high, crypto ETFs on Wall Street hit fresh milestones, and the looming U.S. election seems poised to boost the ecosystem. And yet, beneath this glittery surface, major cracks have formed within the core of crypto-native businesses. Consensys, DYdX, and Kraken – industry heavyweights – each announced substantial layoffs, leaving the community bewildered.

Crypto’s Industry Giants Face Heavy Layoffs

In what seems like a bizarrely bearish week for a so-called bull market, three of America’s crypto industry champions had a rough stretch. On Tuesday, Consensys slashed 20% of its workforce worldwide. A few hours later, New York’s own DYdX cut 35% of its crew. By Wednesday morning, Kraken, a powerhouse exchange, downsized by 15%. Coinbase then closed the week with a disappointing Q3, reporting reduced customer engagement and missing financial targets.

This tumble isn’t just a random blip, analysts say; it’s a sign of deeper fractures, revealing the mounting pressures facing crypto-native firms while Wall Street giants like BlackRock gobble up the BTC pie. Owen Lau, a senior analyst at Oppenheimer & Co., sees capital flowing increasingly toward traditional finance names, not the crypto-natives. “Bitcoin’s price went up, but that inflow bypassed the crypto-native firms,” Lau observed. Wall Street’s lower fees and massive brand trust are siphoning investments into traditional finance’s exchange-traded funds (ETFs) instead of the original crypto players.

Regulatory Hurdles and Election Woes Compound Crypto’s Pain

Adding fuel to the fire, America’s regulatory environment remains unpredictable. SEC lawsuits alone have bled crypto firms of over $400 million in legal costs, says the Blockchain Association, which recently launched an initiative to track these hefty expenses. Kristin Smith, CEO of the association, shared that both a Trump or Harris administration could potentially usher in more crypto-friendly policies. However, she cautions that the SEC’s current hostility has stunted business growth in ways that won’t mend anytime soon. “Capital’s sitting on the sidelines, cautious to enter until they see more clarity,” Smith added.

Consensys CEO Joe Lubin echoed this sentiment, linking his company’s layoffs to the “millions” it’s funneled into SEC court battles. Meanwhile, some industry analysts believe that even the most pro-crypto government might not resolve crypto’s underlying issues. Lau predicts an inevitable shakeout among crypto-native companies, hinting that centralized exchanges face an overcrowded market – “I don’t know why the market would allow 200 exchanges globally,” he mused.

Bitcoin’s Rise Fails to Spark a Broader Bull Market

While Wall Street’s crypto moment sparks excitement, skeptics warn it won’t ignite a true bull run without the kind of groundbreaking tech that once propelled decentralized apps (dapps) or NFTs to new heights. Ninepoint’s managing director, Alex Tapscott, noted, “This is the most bearish bull market of all time.” Tapscott thinks it’s going to take more than just SEC Chair Gensler’s departure to launch a bonafide crypto rally.

New political support and Wall Street hype might draw attention, but they can’t replace the frenzy of a genuine use case for blockchain tech. As Tapscott puts it, the question remains: “How do you do something with the technology that wasn’t possible before?” Until the industry finds an answer, it appears that Bitcoin may continue soaring solo.