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


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

Steven Ferdman | Getty Images

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

Cryptocurrency exchange will reduce 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has approximately 5,000 full-time employees, which translates into a staff reduction of about 1,100 people.

Shares of Coinbase fell 5.4% on Tuesday morning.

CEO Brian Armstrong pointed to a possible recession and the need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “too fast” during a bullish market.

“It looks like we’re entering a recession after an economic boom of more than 10 years. A recession could lead to another cryptocurrency winter and could last a long time,” Armstrong said, adding that past cryptocurrencies have led to a significant decline in trading. . activity. “Although it is difficult to predict the economy or the markets, we always plan for the worst in order to be able to operate the business in any environment.”

Coinbase had initially said it was pausing hiring. Two weeks later, the cryptographic giant announced that it was extending the freeze to the “foreseeable future.” Earlier this year, Coinbase said it planned to add 2,000 jobs in products, engineering and design.

“The costs to our employees are too high to effectively manage this uncertain market,” Armstrong said. “Although we did our best to do this well, in this case I am now clear that we hired in excess.”

The news comes during a deep defeat for Coinbase shares. The shares were released through a direct quote last April during a boom in cryptocurrencies and investors demanding high-growth technology stocks. Coinbase shares have fallen 79% this year and 85% from an all-time high. Meanwhile, bitcoin has fallen to about $ 22,000 and lost 53% of its value this year.

San Francisco-based Coinbase reported a drop in users in the last quarter and a 27% drop in revenue from a year ago. The company obtains most of its main line from transaction fees, which are closely linked to business activity.

Employees of Coinbase Global Inc., the largest cryptocurrency exchange in the United States. Watch their list on the Nasdaq MarketSite jumbotron in Times Square in New York, USA. UU., April 14, 2021.

Shannon Stapleton | Reuters

President and Chief Operating Officer Emilie Choi described it as a “very difficult decision for Coinbase”, but given the economic context, she said she “felt like the most prudent thing to do now”.

Affected employees received an HR notification. If so, the note was sent to a personal email as 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 a single person makes a hasty decision that harms the company or itself.”

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

“If there are any cuts in new product areas, it will be closer to experimental risk areas in which we are still very optimistic, but in which we do not want to invest in this part of the cycle,” Choi told CNBC. in an interview at company headquarters.

“We will continue to invest in incredible innovative areas of cryptography that we think are emerging in the long run, but we will probably do so in a more measured way in this type of environment.”

Coinbase joins dozens of other technology and cryptocurrency companies that are slowing down hiring. BlockFi lender BlockFi said it was cutting 20% ​​of its employees on Monday. Layoffs.fyi open source tracker estimates that more than 5,500 new business and technology jobs were cut in June alone.

Coinbase’s intent is “to make this a unique event,” Choi said, adding that the company has $ 6 billion in cash on its balance sheet. The company has experienced several bearish crypto markets before, also known as “cryptographic winters”.

“We will feed any macro environment, any cryptographic winter or anything that comes up,” he said. “However, the reality is that we have to adjust when we feel that there is a very dynamic economic environment.”

Technology companies struggled with low morale and attrition as their actions plummeted. Last week, a petition posted on a decentralized publishing platform called for removal and a “censorship vote” regarding several Coinbase executives, including Choi.

Coinbase Brian Armstrong drew attention to the petition removed since then and, in a tweet, urged employees to resign if they do not 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 is not very clear if this document came from the company,” Choi said. . “However, if it did, we would be disappointed if those behind it felt the need to violate the trust of the company and its co-workers by sharing this information in a way clearly designed to generate controversy rather than meaningful dialogue.”

Coinbase has no plans to offer additional company capital grants or cash compensation amid falling prices, Choi said. The company offers annual grants, in part so that employees can “mitigate changes” and the volatility of cryptography. For employees and investors, the COO has compared it to Amazon or Tesla – a long-term investment with volatility in the meantime.

“We think anyone who researches, whether it’s an employee or an investor, will have a good long-term return,” Choi said. “Coinbase is a long-term game: we have a deep belief in the long-term value of stocks.”





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