Roham Gharegozlou, founder and chief executive of Dapper Labs Inc., the developer of CryptoKitties and the nonfungible token market NBA Top Shot, announced late Wednesday that the company is laying off 22% of its staff in the wake of the falling NFT market.

“These reductions are the last thing we want to do, but they are necessary for the long-term health of our business and communities,” Gharegozlou said. “We know Web3 and crypto is the future across a multitude of industries — with 1000x potential from here in terms of mainstream adoption and impact — but today’s macroeconomic environment means we aren’t in full control of the timing.”

Dapper Labs is well-known for a multitude of extremely popular products, including “CryptoKitties,” an Ethereum-based blockchain game that allows players to purchase, collect, breed and sell virtual cats that are NFTs. These crypto assets are unique and controlled by the user and, as a result, maintain value and can be bought and sold for other cryptocurrencies and exchanged for money.

The company also developed NBA Top Shot, which is an NFT marketplace for collectible basketball video clip “moments” stored on the Flow blockchain, which was also developed by Dapper Labs.

Although the NFT markets soared high in late 2021, cryptocurrency markets, and subsequently NFTs, crashed during what was dubbed “crypto winter” in recent months. According to a report from Reuters, the third quarter of 2022 saw $3.4 billion in NFT sales, down from $8.4 billion the previous quarter, which is down even further from the $12.5 billion at the market’s peak in the first quarter of the year.

This dramatic reduction in the NFT market affected NBA Top Shot’s October sales volume, according to the analytics site CryptoSlam. The marketplace generated almost $2.6 million in secondary sales in October, which was down significantly from the $40.8 million earned during the same time last year. During the peak months of the NFT craze, the marketplace generated $224 million in sales in February 2021.

In the announcement, Gharegozlou said that the company “took a very deliberate approach in looking at our business today” in light of the bear market and assessing the team and determining the market strategy going forward. He mentioned no details as to exactly what that strategy would be.

“Across Dapper Labs, we are doubling down on what will move the needle and get the whole industry to its next inflection point — and pulling back on everything that doesn’t fit that focus,” Gharegozlou said.

As for the team members affected by the layoffs, they will be compensated while they seek new opportunities. The package includes three months of severance, six months of continued health benefits, career coaching and alumni support.

“To support departing team members, we have worked to create a package of benefits so you can receive compensation, health and other benefits from Dapper Labs while you seek your next opportunity,” Gharegozlou said.

These layoffs follow a number of different crypto industry companies downsizing in the past months. Coinbase Inc. reduced staff by 18% in June, cryptocurrency exchange Crypto.com cut staff by more than 30% and Bitmex plans to cut 30% of its workers this month. Galaxy Digital, a crypto financial services firm, is exploring a 20% cut in its staff.

Image: Dapper Labs