Coinbase, one of the main ways people buy and sell crypto assets (with a self-proclaimed 98 million users) and a top barometer for the industry’s health, is cutting its workforce by 18%. On Monday, crypto lender Blockfi and the exchange Crypto.com both announced they are cutting their workforces in light of the down market and a rough outlook for the rest of 2022. BlockFi plans to lay off 20% of its workers and Crypto.com said it’s reducing its staff by 5%.
Cryptocurrency exchange Coinbase is cutting its workforce by 18%, according to an 8-K filed by the company on Tuesday, as the crypto market continues to get hammered on expectations of more aggressive Federal Reserve interest rate hikes. The reduction will shrink the company’s workforce by 1,100 employees to 5,000 in total by June 30, according to Yahoo Finance.
Last month, Coinbase said it would slow hiring and rescind some job offers, a far cry from the company’s original goal at the beginning of this year to triple its headcount.
What has changed?
Brian Armstrong, CEO and Co-founder of Coinbase said in his note to the employees that the decision to reduce the size of the team was taken „to ensure we stay healthy during this economic downturn”.
He said that over the past month, had many conversations with the Exec team and the Board to discuss recent market events as well as the state of the Coinbase’s business.
„Several realities have become clear to me in these discussions:
Economic conditions are changing rapidly: We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.
Managing our costs is critical in down markets: Coinbase has survived through four major crypto winters, and we’ve created long term success by carefully managing our spending through every down period. Down markets are challenging to navigate and require a different mindset.
We grew too quickly: At the beginning of 2021, we had 1,250 employees. At the time, we were in the early innings of the bull run and adoption of crypto products was exploding. There were new use cases enabled by crypto getting traction practically every week. We saw the opportunities but we needed to massively scale our team to be positioned to compete in a broad array of bets. It’s challenging to grow at just the right pace given the scale of our growth (~200% y/y since the beginning of 2021). While we tried our best to get this just right, in this case it is now clear to me that we over-hired.
So what’s next?
In the note with all Coinbase employees, Brian Armstrong mentioned the need to manage expenses and to increase efficiency.
„As we operate in this highly uncertain period in the world, we want to ensure we can successfully navigate a prolonged downturn. Our team has grown very quickly (>4x in the past 18 months) and our employee costs are too high to effectively manage this uncertain market. The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged.
„We have now exceeded the limit of how many new employees we can integrate while growing our productivity. For the past few months, adding new employees has made us less efficient, not more. We have seen ourselves slow down considerably due to coordination headwinds, and difficulty fully integrating new team members. We believe the targeted resourcing changes we are making today will allow our organization to become more efficient.„
However, the CEO’s message to the remaining team is not encouraging: „I expect you will all feel some level of fear, uncertainty and doubt about the future.”
The Coinbase announcement adds to a litany of bad news for the crypto industry, with the total value of crypto assets dropping by 25% over the past month from $1.24 trillion to $929 billion as of Tuesday morning, according to Coinmarketcap.
Coinbase’s shares are down almost 79% this year and 85% from all-time high. Meanwhile, bitcoin has dropped below USD 21,000 and has lost 55% of its value this year.
Banking 4.0 – „how was the experience for you”
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Many more interesting quotes in the video below:
