A sharp reduction of 1,100 employees was unveiled today by Brian Armstrong, the CEO of Coinbase. The workforce, which recently surpassed 5,000 individuals, will now see an 18% decrease.
To address escalating costs, in light of economic constraints and last year’s rapid expansion, Coinbase is cutting 1,100 employees from its payroll. The volatile nature of the industry saw Coinbase grow by over 200% annually. The stock and cryptocurrency markets’ fluctuations have both impacted Coinbase’s performance.
Following the meteoric rise in the cryptocurrency sector, Coinbase has emerged as a dominant exchange and is among the few registered to conduct operations within the U.S. Its exponential growth in recent years highlights the industry’s potential.
On June 14, 2021, a blog post by CEO Brian Armstrong, alongside notifications to the affected staff, communicated the necessity to trim 18% of the workforce due to economic pressures, overexpansion, and the need to manage expenses amid a market decline.
Anticipating an economic downturn, Armstrong expressed concerns about a looming recession potentially ushering in another “crypto winter,” which could persist for an extended duration. He noted that historically, trading revenue—Coinbase’s largest income source—has significantly dropped during such periods. Given the unpredictability of economic and market conditions, the company aims to be prepared for any situation.
Brian Armstrong elaborated on how Coinbase has navigated through four significant “crypto winters,” emphasizing their strategy of prudent financial management during downturns to ensure long-term success.
Armstrong also reflected on the company’s rapid expansion over the past year, admitting that, in the pursuit of capitalizing on emerging opportunities, they might have overextended themselves in terms of growth.
As a form of support, the organization is providing the affected staff with 14 weeks of severance pay, healthcare coverage, and job placement assistance.
The reduction in workforce is a well-calculated decision, with Coinbase CEO Armstrong revealing that the leadership has been meticulously analyzing expenses for a month. Given that cryptocurrency trading—a core service and revenue stream for Coinbase—could suffer during a potential “crypto winter” similar to previous ones, it’s logical for the company to prepare for such challenges.
As of June 13, 2022, Crypto.com and BlockFi have also announced layoffs. While BlockFi reduced its workforce by 20%, Crypto.com laid off nearly 260 employees, amounting to about 5% of its staff.
Coinbase is listed on Nasdaq, where it is publicly traded. Its business heavily relies on cryptocurrency, and with the simultaneous decline of both stock and cryptocurrency markets, the company is experiencing negative impacts on dual fronts.
For some time, the company has seemingly been gearing up for challenges ahead. In May, the CEO warned customers and shareholders that in the event of Coinbase’s insolvency, they might risk losing their cryptocurrency holdings, signaling the company’s anticipation of a downturn.