The cryptocurrency exchange platform Coinbase is laying off 18 percent of its workforce due to the recent collapse in its stock and crypto prices.
Coinbase has roughly 5,000 full-time workers, which means a headcount reduction of around 1,100 people, and shares of the company closed down 83%.
Armstrong and Fred Ehrsam founded Coinbase ten years ago in June 2012 in San Francisco and California – USA.
CEO Brian Armstrong said in an email sent to the employees on Tuesday, “We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter and last for an extended period.”
According to Forbes, ” a “crypto winter” is when prices “contract and remain low for an extended period”.
Added” “While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.”.
Armstrong pointed to a possible recession and a need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “too quickly” during a bull market.
At first, Coinbase had said it was pausing hiring; two weeks later, the company announced that it was extending the freeze for the “foreseeable future.” Earlier this year, Coinbase planned to add 2,000 jobs across product, engineering, and design.
Armstrong said, “Our employee costs are too high to effectively manage this uncertain market,” adding, “While we tried our best to get this just right, in this case, it is now clear to me that we over-hired.”
Coinbase’s shares are down 79% this year and 85% from the 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 slump in users in its last quarter and a 27% decline in revenue from a year ago. The company gets most of its top line from transaction fees closely tied to trading activity.
President and Chief Operating Officer Emilie Choi called it a “difficult decision for Coinbase.” Still, given the circumstances, she said it “felt like the most prudent thing to do right now.”
Choi said Coinbase would still be “doubling down” on security and compliance and may be “reorienting” employees to near-term revenue drivers, so employees will have access to a talent hub to find new jobs in the industry, including Coinbase Ventures’ portfolio companies.
In conclusion, Coinbase is following the steps of other tech and crypto companies slamming the brakes on hiring.