Cryptocurrency exchange Coinbase Global Inc.
he said he is cutting nearly a fifth of his staff because the company had grown too fast and a potential recession “could lead to another crypto winter.”
The company said Tuesday that it will reduce its workforce by 1,100 employees, or about 18% of its staff, as part of its efforts to manage operating expenses. In a letter to all employees, Chief Executive Brian Armstrong said “our employee costs are too high to effectively manage this uncertain market.”
“It appears that we are entering a recession after an economic boom of more than 10 years,” Mr. Armstrong wrote. “A recession could lead to another crypto winter and could last for an extended period. In previous crypto winters, trading income (our largest source of income) has dropped significantly.”
The destruction in the crypto markets has been wide and deep, with roughly $2 trillion worth of value wiped from numerous cryptocurrencies since November, when bitcoin, the most mainstream of them, hit an all-time high of $67,802.30.
Investors have continued to dump assets seen as risky, such as cryptocurrencies and tech stocks, as the Federal Reserve tries to rein in the highest inflation in the US in decades. The S&P 500 stock index entered a bear market this week as investors expect the Federal Reserve to raise interest rates further.
As of 5 p.m. ET on Tuesday, bitcoin was trading at $21,991.89, down 5.4% on the day and 68% below its all-time high. Dogecoin, a cryptocurrency that started out as a joke but became established enough to be mentioned by Elon Musk on “Saturday Night Live,” peaked at 67.4 cents in May 2021 and has plunged 92% since. .
Coinbase, the largest cryptocurrency exchange in the US, has struggled to hold on to users this year as the frenzy in digital assets cools and markets have been unsettled. In May, Coinbase said it lost hundreds of millions of dollars in the first quarter as its trading fees fell sharply. The number of users transacting on Coinbase also fell, and the company said it expected trading volumes and users to drop again in the second quarter.
Since the earnings report, things have gotten worse for crypto prices, Coinbase stock, and the markets in general.
Shares of Coinbase traded at $51.38 on Tuesday, down 1.2%, after Coinbase published the layoff notice as part of a filing with the Securities and Exchange Commission. When Coinbase went public in April of last year, its shares first traded at $381.
Last week, Mr. Armstrong tweeted a criticism of a request by Coinbase employees to fire some company executives, not including Mr. Armstrong, because “the executive team has recently been making decisions that are not in the best interest of the company, its employees and its shareholders.
In a June 10 Twitter thread that spanned 16 tweets, Armstrong said, “If you don’t trust the executives or CEO of a company, why are you working at that company? Quit and find a company to work for that you believe in!”
Coinbase said it expects to have 5,000 employees after the layoffs and that laid off employees will receive at least 14 weeks of severance pay.
One of the largest cryptocurrency lenders, Celsius Network, told users on Sunday night that it was pausing all withdrawals, trades, and transfers between accounts due to extreme market conditions.
Other crypto-focused companies have recently announced layoffs as crypto prices have plummeted. BlockFi, a cryptocurrency trading and lending platform, said on Monday it would reduce its headcount by 20% as it said “the macroeconomic environment has changed dramatically.”
The CEO of Crypto.com, the company that recently put his name in the Los Angeles Lakers arena and ran a Super Bowl ad featuring LeBron James, said his company would make “targeted reductions” of about 5% of its workforce. , or 260 jobs. In early June, cryptocurrency exchange Gemini Trust Co. cut 10% of its staff, citing the effects of the market downturn.
The layoffs come after a hiring boom as cryptocurrencies grew in value. Hiring of crypto firms doubled from November to April, according to data compiled by ManpowerGroup.
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