Coinbase lays off 18% of employees as executives prepare for recession and ‘crypto winter’

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

Steven Ferdman | Getty Images

Coinbase is laying off almost a fifth of its workforce amid a drop in its stock and crypto prices.

Cryptocurrency exchange to cut full-time jobs by 18%, According to an email sent to staff on Tuesday morning. Coinbase has around 5,000 full-time employees, which represents a reduction in headcount of around 1,100.

Coinbase shares are up about 2.3% pre-market.

CEO Brian Armstrong pointed to a potential slowdown and the need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “really quickly” during the bull run.

Armstrong said: “It looks like we are entering a recession after more than a decade of economic boom. The recession could lead to another crypto winter and last for an extended period of time.” The past crypto winter saw a significant drop in trading. Action. “While it is difficult to predict the economy or the markets, we always plan for the worst so we can conduct our business in any environment.”

Coinbase initially said it was halting the hiring. Two weeks later, the crypto giant announced that it would extend the freeze to “the foreseeable future.” Earlier this year, Coinbase said it plans to create 2,000 jobs in product, engineering and design.

“Our labor costs to effectively manage this uncertain market are too high,” said Armstrong. “While we’ve done our best to fix this, in this case I now realize we’ve hired too much.”

The news comes amid a dark journey for Coinbase stocks. The stock went public via a direct listing last April during a boom in crypto markets, and investors braced for high-growth tech stocks. Coinbase stock is down 79% this year and 85% from an all-time high. Meanwhile, Bitcoin fell nearly $22,000, losing 53% of its value this year.

San Francisco-based Coinbase reported a 27% decline in user numbers and a 27% year-over-year decline in revenue last quarter. The company makes most of its revenue from transaction fees, which are closely related to trading activity.

Employees of America’s largest cryptocurrency exchange, Coinbase Global Inc., show their listing on the Nasdaq marketsite Jumbotron in Times Square on April 14, 2021 in New York, USA.

Shannon Stapleton | Reuters

President and Chief Operating Officer Emily Choi called it “a very difficult decision for Coinbase,” but given the economic backdrop, she said, “it felt like the smartest thing to do right now.”

Affected employees were informed by the HR department. In this case, the memo was sent to a private email address because Coinbase has blocked access to the company’s system. Armstrong called this the “only practical option” given the number of employees with access to customer information, and “a way to ensure that no single person makes a hasty decision that harms the company or themselves.” “

Coinbase employees have access to the Talent Hub to find new jobs in the industry, including at Coinbase Ventures’ portfolio companies. Choi said they would still “double down” on areas like security and compliance and could “redirect” employees to short-term revenue drivers.

“If there are cuts in new product areas, it’s more likely to be in experimental business areas, which we’re still very excited about, but we don’t want to invest in that part of the cycle,” Choi told CNBC. In an interview at company headquarters.

“We will continue to invest in the incredibly innovative areas of crypto that we believe will evolve over the long term, but we will likely do so in a more measured way in this type of environment.”

Coinbase joins dozens of other tech and crypto companies putting the brakes on hiring. Crypto lender BlockFi said on Monday that it would cut 20% of its staff. Open-source tracker Layoffs.fyi estimates that more than 5,500 startup and tech jobs were shed in June alone.

Coinbase intends “this to be a one-time event,” Choi said, adding that the company has $6 billion in cash on its balance sheet. The company has previously gone through several crypto bear markets, also known as “crypto winters.”

“We will get through any macro environment, any crypto winter, or anything else to come,” she said. “However, the reality is that although we believe there is a very dynamic economic environment at play, we have to adapt.”

Tech companies struggle with low morale and attrition as their stocks plummet. Last week, a petition posted to a decentralized publishing platform called for its removal and a “vote of no confidence” on several Coinbase executives, including Choi.

Coinbase’s Brian Armstrong, meanwhile, has drawn attention to the takedown petition and in a tweet urged employees to leave if they don’t believe in the company.

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“We will always encourage our employees to provide feedback internally on how we operate as a company – and we have a number of mechanisms in place to do this. It’s not entirely clear what this document is about within the company. It came out,” Choi said. “However, if that is the case, we are disappointed that the individuals behind it appear to have betrayed the trust of the company and its employees by sharing this information in a way designed to encourage controversy rather than in a meaningful way.” Dialogue.” felt the need.”

Choi said Coinbase has no plans to offer additional equity grants or cash compensation given the price drop. The company provides annual grants, in part to allow employees to “minimize” fluctuations and volatility in crypto. For employees and investors, the COO compared it to Amazon or Tesla: a long-term investment with intermittent volatility.

“We believe that anyone who invests, whether employee or investor, will have good returns over the long term,” Choi said. “Coinbase is a long-term play – we strongly believe in the long-term value of the stock.”

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