Crypto

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

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

Steve Ferdman | fake images

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

Cryptocurrency Exchange Will Eliminate 18% of Full-Time Jobs, according to an email sent to employees Tuesday morning. Coinbase has approximately 5,000 full-time workers, which translates to a headcount reduction of around 1,100 people.

Coinbase shares were up around 1% before the markets opened.

CEO Brian Armstrong pointed to a potential recession and the need to manage Coinbase’s rate of consumption 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 over 10 years. A recession could lead to another crypto winter and it could last for an extended period,” Armstrong said, adding that previous crypto winters have resulted in a decline. significant in trade. exercise. “While 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 had initially said that it was pausing trading. Two weeks later, the cryptocurrency giant announced that it would extend the freeze for the “foreseeable future.” Earlier this year, Coinbase said it planned to add 2,000 product, engineering, and design jobs.

“Our employee costs are too high to effectively manage this uncertain market,” Armstrong said. “While we did our best to get it right, in this case it is now clear to me that we overhired.”

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

San Francisco-based Coinbase reported a drop in users in its latest quarter and a 27% decline in revenue from a year earlier. The company makes most of its profit from transaction fees, which are closely tied to trading activity.

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

Shannon Stapleton | Reuters

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

The affected employees received a notification from Human Resources. If so, the note was sent to a personal email when Coinbase cut off access to the company’s systems. Armstrong called it the “only practical option” given the number of employees with access to customer information, and a way to “ensure that not even one person made a rash decision that hurt the business or hurt themselves.”

Coinbase employees will have access to a talent hub to find new jobs in the industry, including Coinbase Ventures portfolio companies. Choi said they would still be “doubling down” on areas like security and compliance and could be “refocusing” employees on short-term revenue generators.

“If there is any cutback 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 told CNBC. in an interview at the company headquarters.

“We will continue to invest in amazing innovative areas of crypto that we think are emerging for the long term, but we will probably do them in a more measured way in this type of environment.”

Coinbase joins dozens of other cryptocurrency and tech companies in curbing 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 tech and startup jobs have been eliminated 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 experienced several crypto bear markets before, also known as “crypto winters.”

“We will be able to get through any macro environment, any crypto winter or whatever is coming,” he said. “However, the reality is that we have to adjust when we feel there is a very dynamic economic environment at play.”

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

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

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“We will always encourage our employees to share feedback internally about how we operate as a company, and we have a number of mechanisms in place for them to do so. It’s not very clear if this document comes from the company,” Choi said. . “However, if it did, we are disappointed that those behind it felt the need to break the trust of the company and their co-workers by sharing this information in a way clearly designed to spark controversy rather than meaningful dialogue.”

Coinbase has no plans to offer additional company capital grants 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 of cryptocurrencies. For employees and investors, the COO likened it to Amazon or Tesla: a long-term investment with volatility in between.

“We believe that anyone who makes an investment, whether it’s an employee or an investor, will do well in the long run,” Choi said. “Coinbase is a long-term game – we have a very deep belief in the long-term value of stocks.”

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