The billionaire chief of popular crypto-brokerage Coinbase on Tuesday announced plans to lay off about 18% of the company's workforce to lower costs ahead of a potential recession, joining other tech firms in downsizing staffing levels as stocks and cryptocurrencies plunge deeper into bear market territory.
KEY FACTS
In a regulatory filing released Tuesday, Coinbase said it plans to layoff approximately 1,100 employees in response to "current market conditions and ongoing business prioritization efforts.”
"We grew too quickly," CEO Brian Armstrong wrote in a blog post Tuesday, adding that labor costs have grown "too high to effectively manage this uncertain market" and warning the economy "appear[s]
The firm said U.S. employees affected by the layoffs will be terminated Tuesday, and that it will “follow applicable local guidelines” for non-U.S. workers; Coinbase expects to have about 5,000 employees after "substantially" completing the cuts by the end of this month.
Departing employees will receive at least 14 weeks of severance, four months of health insurance and job-search resources, the company said, estimating it will incur about $40 million to $45 million in restructuring expenses related to the termination benefits.
In a letter to shareholders last month, Coinbase warned plunging crypto prices and volatility that began late last year “directly impacted” first-quarter financials and pushed trading volume down to $309 billion (8% lower than last year)—resulting in the firm's first quarterly loss as a publicly traded company.
Coinbase stock fell 6% in pre-market trading after the announcement and has collapsed more than 85% from a closing high in November.
CRUCIAL QUOTE
“Down markets are challenging to navigate and require a different mindset… A recession could lead to another crypto winter, and could last for an extended period,” Armstrong, whose fortune Forbes pegs at $2.2 billion, said Tuesday, noting that trading revenue (the company's largest revenue source) has declined significantly during past periods of crypto-market weakness. “The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged,” Armstrong added.
KEY BACKGROUND
Coinbase debuted on the public market last April after a watershed year for cryptocurrencies, but Federal Reserve efforts to combat sky-high inflation—at the risk of stunting economic growth—have deflated asset valuations—and hit the cryptocurrency industry particularly hard. The price of bitcoin plunged nearly 20% to an overnight low of less than $21,000 on Monday after crypto lending company Celsius first sparked fears by suspending withdrawals due to “extreme market conditions.” Amid the selloff, Binance was forced to halt its exchange due to a backlog issue, while crypto firm BlockFi later announced it was laying off 20% of its workforce due to the challenging market environment.
SURPRISING FACT
The overall value of the world's cryptocurrencies has plunged about 70% to $929 billion, from an all-time high of about $3 trillion in November and $2 trillion at the start of the quarter. Meanwhile, the tech-heavy Nasdaq has plummeted about 32% this year.
TANGENT
Last week, Armstrong lashed out at employees who reportedly started an online petition to remove top executives in response to a hiring freeze and rescinded job offers. “This is really dumb on multiple levels,” Armstrong said of the rebellion, adding: “If you want to do a vote of no confidence, you should do it on me and not blame the execs.”
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