Coinbase lays off 18% of its workforce as executives prepare for recession and ‘crypto winter’

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Coinbase is laying off nearly a fifth of its workforce amid a collapse in its stock and crypto prices.

The cryptocurrency exchange will cut 18% of full-time jobs This is evident from an e-mail sent to employees on Tuesday morning. Coinbase has approximately 5,000 full-time employees, which translates into a staff reduction of approximately 1,100 people.

Shares of Coinbase closed 0.83% lower.

CEO Brian Armstrong pointed to a potential recession and the need to control Coinbase’s burn rate and increase efficiency. He also said the company grew “too fast” during a bull market.

“It looks like we are entering a recession after an economic boom of more than 10 years. A recession could lead to another crypto winter and could last for an extended period of time,” Armstrong said in the email. adding that the past crypto winters have resulted in a significant drop in trading activity. “While it is difficult to predict the economy or the markets, we always plan for the worst so we can run the business in any environment.”

Coinbase Founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.

Steven Ferdman | Getty Images

Coinbase had initially said it was pausing staff hiring. Two weeks later, the crypto giant announced that it would extend the freeze for the “near future”. Earlier this year, Coinbase said it planned to add 2,000 jobs in product, engineering and design.

“Our personnel costs are too high to effectively manage this uncertain market,” Armstrong said. “While we did our best to get this just right, it’s clear to me now that we hired too much.”

The news comes amid a deep defeat for Coinbase stock. The stock went direct-listing last April during a boom in crypto markets and investors clamoring for fast-growing technology stocks. Shares of Coinbase are down 79% this year and 85% from their all-time high. Meanwhile, bitcoin has fallen to nearly $22,000 and has lost 53% of its value this year.

San Francisco-based Coinbase reported a slump in users in the last quarter and a 27% drop in revenue from a year ago. The company derives most of its revenue from transaction costs, which are closely linked to trading activities.

Employees of Coinbase Global Inc, the largest cryptocurrency exchange in the US, watch as their listing appears on the Nasdaq MarketSite jumbotron in Times Square in New York, US, April 14, 2021.

Shannon Stapleton | Reuters

President and Chief Operating Officer Emilie Choi called it a “very difficult decision for Coinbase,” but given the economic backdrop, she said it was “the most sensible thing to do right now.”

Affected employees have received a notification from Human Resources. If so, the memo was sent to a private email because Coinbase was cutting off access to the company’s systems. Armstrong called it the “only practical choice” given the number of employees with access to customer information, and a way to “make sure not even one person made a hasty decision that harmed the company or themselves.”

Coinbase employees have access to a talent hub to find new jobs in the industry, including Coinbase Ventures’ portfolio companies. Choi said Coinbase would still “double down” on areas like security and compliance and “refocus” employees on near-term revenue drivers.

“If there are cuts in new product areas, it will be more around experimental business areas that we’re still very optimistic about, but we don’t want to invest in this part of the cycle,” Choi told CNBC. in an interview at the company’s headquarters.

“We will continue to invest in incredible innovative areas of crypto that we think are emerging in the longer term, but we are probably going to do that in a more measured way in this kind of environment.”

Coinbase joins dozens of other technology and crypto firms that are putting the brakes on hiring people. Crypto lender BlockFi said Monday it was cutting 20% ​​of its employees. Open-source tracker Layoffs.fyi estimates that more than 5,500 jobs for start-ups and tech companies were cut in June alone.

Coinbase’s intent is “for this to be a one-time event,” Choi said, adding that the company has $6 billion in cash on its balance sheet. The company has previously experienced multiple bear markets in crypto, known as “crypto winters.”

“We’ll get through every macro environment, every crypto winter or whatever,” she said. “However, the reality is that if we feel like a very dynamic economic environment is at play, we have to adapt.”

Tech companies have been battling low morale and attrition as their stocks are slammed shut. Last week, a petition on a decentralized publishing platform called for the removal and a “voice of no confidence” regarding several Coinbase executives, including Choi.

Armstrong drew attention to the now-deleted petition and in a Tweet urged employees to quit if they don’t believe in the company.

“We will always encourage our employees to provide feedback internally about how we operate as a company – and we have a number of mechanisms in place to do this. It’s very unclear whether this document came from within the company,” Choi said. † “But if it did, we are disappointed that those behind it felt the need to violate the trust of the company and their colleagues by sharing this information in a way that is clearly intended to cause controversy rather than meaningful dialogue.”

Coinbase does not plan to offer additional corporate capital grants or cash compensation amid the price drop, Choi said. The company offers annual subsidies, in part so that employees can mitigate “the swings” and volatility in crypto. For employees and investors, the COO compared it to Amazon or Tesla: a long-term investment with volatility in the meantime.

“We believe that anyone who makes an investment, be it an employee or an investor, will see a nice return in the long run,” Choi said. “Coinbase is a long-term game – we have a very deep belief in the long-term value of the stock.”



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