Coinbase is laying off nearly a fifth of its workforce amid a crash in stock and cryptocurrency prices.
Crypto exchange will cut 18% of full-time jobsAnd the According to an email sent to employees Tuesday morning. Coinbase has approximately 5,000 full-time workers, which translates to a staff reduction of about 1,100 people.
Coinbase shares were down about 5.4% on Tuesday morning.
CEO Brian Armstrong pointed to a possible recession, the need to manage Coinbase’s burn rate and increase efficiency. He also said the company had grown “very, very quickly” during a bull market.
“It looks like we are entering a recession after an economic boom of more than 10 years. The recession could lead to another crypto winter, and it could last for a long time,” Armstrong said in the email, adding that past crypto winters have triggered a significant surge. in the value of the cryptocurrency. A decrease in trading activity. “While it is difficult to predict the economy or markets, we always plan for the worst so that we can manage the business through any environment.”
Coinbase founder and CEO Brian Armstrong attended Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.
Stephen Friedman | Getty Images
Coinbase initially said it was temporarily halting hiring. Two weeks later, the crypto giant announced that it was extending the freeze for the “foreseeable future.” Earlier this year, Coinbase said it plans to add 2,000 jobs across products, engineering and design.
“Our personnel costs are too high to effectively manage this uncertain market,” Armstrong said. “While we have been doing everything we can to get this completely right, in this case it is now clear to me that we have hired too much.”
The news comes during a deep trajectory for Coinbase stocks. The stock went public through a direct listing last April during a boom in the cryptocurrency markets and investors were clamoring for high-growth technology stocks. Coinbase shares are down 79% this year and 85% from an all-time high. Meanwhile, bitcoin has dropped to nearly $22,000 and has lost 53% of its value this year.
San Francisco-based Coinbase reported a decline in users last quarter and a 27% drop in revenue from a year ago. The company gets the majority of its profits from transaction fees, which are closely related to the trading activity.
Employees of Coinbase Global Inc, the largest cryptocurrency exchange in the United States, watch as they display their listing on the Nasdaq MarketSite jumbotron in Times Square in New York, US, April 14, 2021.
Shannon Stapleton | Reuters
President and Chief Operating Officer Emily Choi called it a “very difficult decision for Coinbase” but given the economic background, she said it “seems to be the most prudent thing to do now.”
Affected employees have received notification from Human Resources. If so, the memo was sent to a personal email where Coinbase cut off access to the company’s systems. Armstrong called it “the only viable option” given the number of employees who have access to customer information, and a way “to ensure that no one makes a hasty decision that harms the company or themselves.”
Coinbase employees will be able to access the talent center to find new jobs in the industry, including Coinbase Ventures portfolio companies. Choi said Coinbase will continue to “double up” in areas such as security and compliance and possibly “redirect” employees to revenue drivers in the near term.
“If there are any cutbacks in new product areas, it will be more about pilot project areas that we remain optimistic about, but we don’t want to invest in this part of the cycle,” Choi told CNBC. In an interview at the company’s headquarters.
“We will continue to invest in incredibly innovative areas of cryptocurrency that we believe are emerging over the long term, but potentially do so in a thoughtful manner in this type of environment.”
Coinbase is joining dozens of other tech and crypto companies that are curbing the hiring process. Crypto lender BlockFi said Monday that it will cut 20% of its staff. Open source tracker Layoffs.fyi estimates that more than 5,500 start-up and tech jobs were cut in the month of June alone.
Choi said Coinbase’s intention is “for this to be a one-time event,” adding that the company has $6 billion in cash on its balance sheet. The company has lived through many bear markets in cryptocurrency before, also known as “crypto winter.”
“We’ll run through any macro environment, any crypto winter, whatever is coming,” she said. “But the reality is that we have to adapt when we feel there is a very dynamic economic environment at play.”
Tech companies are battling low sentiment and attrition as their stocks come under fire. Last week, a petition to a decentralized publishing platform called for removal and a “vote of no confidence” in relation to several Coinbase executives, including Choi.
Armstrong has drawn attention to the since-deleted petition, in a tweet urging employees to resign if they do not believe in the company.
“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,” Choi said. “It is largely unclear whether this document came from within the company.” . “However, if it does, we are disappointed that those behind it felt the need to breach the trust of the company and their co-workers by sharing this information in a manner clearly designed to generate controversy rather than meaningful dialogue.”
Choi said Coinbase has no plans to offer additional stock grants, or cash compensation amid the price drop. The company provides annual grants, in part so that employees can “mock down” and volatility in cryptocurrencies. For employees and investors, the COO likened it to Amazon or Tesla: a long-term investment with ups and downs in the meantime.
“We believe that anyone who makes an investment, whether they are an employee or an investor, will get a good return in the long run,” Choi said. “Coinbase is a long-term game — we have a very deep belief in the long-term value of the stock.”