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 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. The bitcoin price is down about two-thirds from its high over the past year. The S&P 500 stock index entered a bear market on Monday as investors continued to unload risky assets as the Federal Reserve tries to rein in the highest inflation in the US in decades. Investors expect the Federal Reserve to raise interest rates further, which would dampen appetite for assets seen as risky, such as cryptocurrencies and tech stocks.
Shares of Coinbase traded at $52.18 on Tuesday, up 0.4%, 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.
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