The talent exodus from Wall Street to crypto will accelerate, predict insiders: ‘It’s actually a career risk if I don’t move into the space’

Langer was working as a managing director at investment firm BTIG, collaborating with clients like hedge funds, and had noticed that for years, achieving above-market returns on the Street was becoming increasingly challenging. But after reading some of BTIG’s own research reports about crypto and blockchain technology, Langer says that, like in the early booming days of hedge funds, “it just became very clear to me that this was kind of history repeating itself in terms of digital assets [being] the single best investable universe for alpha generation for the next 10 years, in my mind,” he told Fortune. “In fact, I’ve never seen something more clearly in my entire career.” In April, he took a job as head of institutional investor relations and business development at crypto investment firm Arca.

Langer is one example of the shift that’s taking place in finance, something that happens every couple decades, where the hallowed halls of mainstream financial institutions start to pale in comparison to a new, fast-growing promised land. It’s similar to the Dot Com boom and the Silicon Valley era, experts say, and these days, some “who are a part of that generation that lived through the financial crisis, now they’re looking at crypto and digital assets and saying, ‘Okay, I missed the Silicon Valley wave, or I wasn’t part of that wave—this is the new wave and I want to have skin in the game,'” says David Richardson, a partner at executive search firm Heidrick & Struggles who focuses on areas like crypto. He notes the firm has seen a “torrent of interest” in the past year from people from more traditional backgrounds including Wall Street.

Indeed, according to Michael Bucella, general partner at digital assets investment firm BlockTower Capital and a Goldman Sachs alum, “finance and Big Tech has been battling it out for talent for the last, call it, a decade and change. And now both of those industries are battling against each other but more so … battling against the world of crypto, decentralized finance [DeFi], Web3,” he tells Fortune.

Bucella says the space has evolved a lot since he left Wall Street for crypto in 2017—Now, “the number of outlets for people looking at this space is significantly wider than it was when I left Goldman.” And based on anecdotes from insiders and numerous reports over the last year and in recent months, hiring in crypto has ramped up.

“We’ve started to see a much, much wider array of applications, the largest being decentralized finance, which is disrupting a lot of the traditional financial incumbents … [and] drawing a lot of their talent away,” notes Bucella. In fact, in January Bucella told the Wall Street Journal that former colleagues were reaching out in droves about crypto jobs. And that hasn’t slowed in recent weeks, he says: On a trip to New York in mid-February, Bucella claims “literally a dozen people, without me having reached out to anybody, have said ‘Hey, we should grab a coffee or lunch—I’m considering something in the industry,'” he said. And last week Bucella said he heard from a friend in investment banking that said they accepted a job in crypto.

Indeed, the announcements keep coming: In late February, Roger Bartlett, a veteran of Goldman Sachs, left the bank to join crypto exchange titan Coinbase. Others like Arca’s Langer say the firm is seeing an “enormous” amount of interest, and he gets calls “all the time” about moving into crypto. Coinbase alone recently said it plans to hire 2,000 employees (though largely engineers) this year.

Interest in jobs in crypto and the price performance of big coins like Bitcoin are correlated, says Michael Shlayen, founder and CEO of crypto-focused recruitment firm Blockhain Headhunter. In past cycles like the 2018 so-called “crypto winter,” where Bitcoin sold off, the crypto recruitment space was “pretty quiet.” But while stalwart crypto coins like Bitcoin and Ethereum have started this year on rough footing, both still down over 40% from their late-2021 all time highs, experts like Bucella and Shalyen predict the flow of professionals from traditional finance into crypto will continue to amp up—at least for now.

Crypto companies have money to spend

On the hiring front it helps that crypto companies are newly flush with cash—the fiat kind that people still like to be paid in.

Massive amounts of money has been flowing from funding sources like venture capital firms into crypto startups, leaving them well positioned to “pay significant salaries and even more significant potential upsides in terms of tokens allocations,” notes Shlayen.

In February, storied VC firm Sequoia Capital announced it was raising up to $600 million for a fund focused on tokens, and last week crypto-focused firm Electric Capital raised $1 billion to invest across two funds. Meanwhile crypto exchange FTX launched its own $2 billion venture fund in January, while crypto VC firm Paradigm announced a $2.5 billion fund last November. VCs invested over $33 billion in crypto and blockchain startups last year, per a report from crypto investment manager Galaxy Digital. That’s why “even if the [crypto] market cools off, there is still so much cash and so much money to spend on building things and building projects and products that companies will still be hiring a lot,” suggests Shlayen.

Bucella believes crypto has “crossed the chasm” in 2022, where “there is infinitely more outlets for professionals to engage with … the cryptocurrency world than there were even 18 months ago,” as the space has expanded further into areas like Web3, DeFi, NFTs, and gaming, arguing the pipeline will “definitively” accelerate. Blockchain Headhunter’s Shlayen echoes the prediction, with a caveat: “If the market continues as it evolved over the last year, the exodus will continue and the pace will be increasing. That’s my guess,” he says, though if coins like Bitcoin were to sink even further for longer, that may slow the pace.

According to a recent survey by Heidrick & Struggles conducted between July and October of 2021, nearly half of the 45 respondents that went into the crypto field came from investment banking. Those like Richardson think there are “pull factors” for professionals going into crypto: “Meaning, doing something that’s creative, doing something that’s nimble, new, high growth, a lot of energy, really good technology,” he notes. He believes there will be an increasing short term stream of professionals from traditional financial services into crypto, though he suggests once the talent pool in the crypto community has grown large enough, it will become “self-sustaining.”

There’s also certainly a perception element, experts say. “Wall Street isn’t really sexy anymore,” argues Shlayen. And Richardson notes that anecdotally, “When we first started placing people in [crypto companies], the thing that we’d often hear about is, ‘My son or daughter thinks I’m so cool. They actually know what I do now.'”

But clearly an exciting job title isn’t the only consideration for professionals contemplating a move.

A post-bonus season exodus?

Big banks have been divvying out huge bonuses in a bid to retain talent, as the Wall Street Journal, New York Times, and others reported, at levels not seen since 2009 (though some firms have cautioned employees not to expect the same magnitude moving forward).

As the ranks of the big banks have seen large bonuses in recent months, Bucella, for one, predicts we’re likely to see a further uptick in folks leaving their roles at banks for crypto.

However, Heidrick & Struggles’s Richardson notes those bonuses aren’t all paid out during bonus season, and likely won’t pay out or vest fully for several years, “so anyone that’s going to leave and take a job in crypto for a private company [is] kissing goodbye to that unvested compensation,” he notes.

And even then, some of the big banks are looking to fight back. Goldman Sachs is reportedly exploring ways to discourage executives from leaving the firm by confiscating vested stock, according to Bloomberg. The recent report was a surprise to alums like Bucella, who said when he was leaving Goldman, he knew he would likely part with his unvested equity, but keep the equity that was already vested. The issue at Goldman, per Bloomberg, is largely with employees going to competitors or even clients, but Bucella doesn’t necessarily believe the bank would target employees leaving for crypto firms right now. “At some point, maybe it’s a few years down the line, I’m sure they’ll view some cryptocurrency startups … as competitors,” he said, but “I would be surprised if anyone that came into crypto from [Goldman] had their vested equity withheld.”

Regardless, Bucella suggests “if [employees are] at that point where they’re considering leaving, typically the vesting cycle won’t deter them as much as you think it would. They’ve already psychologically made the decision that they want to come into the space,” he says.

Indeed, for David Duong, who left his job as chief FX research strategist for Latin America at HSBC to head up institutional research at Coinbase in November of last year, “the inflection point [of the maturity of the crypto asset class] was obvious. It was just like, ‘You know what, it’s actually a career risk if I don’t move into the space,'” he told Fortune. He added that “the compensation doesn’t really factor as much for me as the actual work I’m doing.”

Based on their experiences, Bucella, Richardson and Shlayen note the pay in crypto is often roughly in-line with, if a little below, what banks will pay on a base salary basis, while the equity compensation some crypto startups offer can potentially be even more lucrative.

Ultimately, BlockTower’s Bucella estimates despite banks’ best efforts, “I don’t understand how they’re going to keep the ranks in traditional Wall Street.” Or as Langer, the former managing director at BTIG frames it, “it’s not that the banks are bad, it’s just that crypto is just really damn good.”