HomeBusinessCoinbase lays off 18% as executives brace for recession, 'crypto winter'

Coinbase lays off 18% as executives brace for recession, ‘crypto winter’

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

Steven Ferman | Getty Images

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

Cryptocurrency exchange will cut 18% of full-time jobs, according to an email sent to employees on Tuesday morning. Coinbase has about 5,000 full-time employees, which translates to a workforce reduction of about 1,100 people.

Coinbase shares are down about 7% before market.

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

“We appear to be 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, adding that past crypto winters have led to a significant decline. Exchanges. activity. “Although it is difficult to predict the economy or the markets, we always plan for the worst so that we can operate the business in any environment.”

Coinbase originally announced that it was suspending hiring. Two weeks later, the crypto giant announced that it was extending the freeze for the “foreseeable future”. Earlier this year, Coinbase said it plans to create 2,000 product, engineering, and design jobs.

“Our personnel costs are too high to effectively manage this uncertain market,” Armstrong said. “Although we did our best to make it perfect, in this case it is now clear to me that we have over-hired.”

The news comes amid a deep rout for Coinbase stocks. The stock went public via a direct listing last April amid a boom in crypto markets and investors clamoring for high-growth tech stocks. Coinbase shares are down 79% this year and 85% from the all-time high. Meanwhile, bitcoin has fallen to nearly $22,000 and lost 53% of its value this year.

San Francisco-based Coinbase reported a drop in user numbers in its most recent quarter and a 27% drop in revenue from a year ago. The company derives the majority of its revenue from transaction fees, which are closely tied to trading activity.

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

Shannon Stapleton | Reuters

President and COO Emilie Choi called it a “very difficult decision for Coinbase,” but given the economic backdrop,” she said, “it seemed like the most prudent thing to do in this time. moment”.

Affected employees have been notified by HR. If so, the memo was sent to a personal email because Coinbase cut off access to company systems. Armstrong called it the “only practical choice” given the number of employees with access to customer information, and a way to “ensure that no one makes a rash decision that harms the business.” company or to itself”.

Coinbase employees will have access to a talent hub to find new industry jobs, including Coinbase Ventures portfolio companies. Choi said they would continue to “double down” on areas such as safety and compliance and could “redirect” employees to short-term revenue streams.

“If there are cuts in new product areas, it will be more in experimental risk areas that we are still very bullish on, but don’t want to invest in at this part of the cycle,” Choi said. at CNBC. during an interview at the company’s headquarters.

“We will continue to invest in incredible innovative areas of crypto that we believe are emerging in the longer term, but we will likely do so in a more measured way in this type of environment.”

Coinbase joins dozens of other tech and crypto companies holding back hiring. Crypto lender BlockFi said it was cutting 20% ​​of its employees on Monday. Open-source tracker Layoffs.fyi estimates that more than 5,500 start-up and tech jobs were cut in June alone.

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

“We will weather any macro environment, any crypto winter or whatever is coming,” she said. “The reality though is that we have to adjust when we feel there’s a very dynamic economic environment at play.”

Tech companies struggled with low morale and attrition as their stocks slumped. Last week, a petition posted on a decentralized publishing platform called for the removal and “vote of no confidence” in several Coinbase executives, including Choi.

Coinbase’s Brian Armstrong called attention to the since-deleted petition and, in a Tweet, urged employees to quit if they don’t believe in the company.

TWEET

“We will always encourage our employees to share their feedback internally on how we are operating as a business – and we have a number of mechanisms in place for them to do so. It is very difficult to know whether this document is from the company,” Choi said. . “However, if that were the case, we are disappointed that those behind it felt the need to break the trust of the company and their colleagues by sharing this information in a manner clearly designed to cause controversy rather than meaningful dialogue.”

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

“We believe that anyone who makes an investment, whether it’s an employee or an investor, will have a nice long-term return,” 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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