Coinbase slashes about 1,100 jobs as crypto crisis worsens

Cryptocurrency exchange Coinbase is cutting 18% of its workforce or about 1,100 jobs, amid depressed markets and concerns of a looming recession.

The company’s chief executive, Brian Armstrong, informed employees of the layoffs in a memo, saying that the company had “over-hired” its staff during a crypto boom. The company will have around 5,000 employees post the cut.  

“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly. 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,” he said.  

Also read: Crypto market value slips below $1 trillion: What should you know?

Armstrong also added that managing costs is now critical in down markets. “We have survived through four major crypto winters, and we’ve created long term success by carefully managing our spending through every down period. Down markets are challenging to navigate and require a different mindset,” he said.  

Armstrong also saw this as a response to excessive optimism about crypto's future. Coinbase felt it had to grow rapidly in 2021 to compete across numerous sectors and take advantage of crypto's value surge, but it's now apparent that the company "over-hired" while the market was strong. The exchange started 2021 with 1,250 employees, and will still have roughly 5,000 people employed by the end of the current quarter.  

The firm is promising at least 14 weeks of severance pay, four months of US health insurance and help finding new work, but the decision comes after multiple attempts to avoid cutting jobs. Coinbase first paused hiring, and later rescinded accepted job offers as economic conditions soured.  

Armstrong has also said that employees who are laid off will be offered benefits including at least 14 weeks’ severance pay, four months of health coverage in the United States, four months of mental health support and assistance finding new work.  

On June 2, Coinbase said that it would extend its hiring freeze to battle the economic downturn. The layoff announcement today signalled the broader market downturn and how crypto firms are being more watchful of costs as the economy slips into a potential recession.  

Coinbase is not the first crypto firm to lay off employees.   

Earlier this week, Peter Thiel-backed start-up BlockFi said that it will cut about 20% of its staff strength to about 170 people, with CEO Zac Prince blaming the “dramatic shift in macroeconomic conditions worldwide” in a tweet as reason for the cuts.  

Elsewhere, crypto.com CEO Kris Marszalek Tweeted that the company would reduce its workforce by about 5% to 260 people. At the beginning of June, crypto exchange Gemini fired 10% of its workforce.   

As investors draw back on risky assets, such as cryptocurrency, exchanges are seeing reduced trade volumes, less activity, and, as a result, lower profitability.  

There has been nearly six months of adverse price activity since the November highs of 2021, with analysts warning that the industry is in a “contraction phase” known as “crypto winter.”  

On Monday, the price of bitcoin and other cryptocurrencies slumped again after cryptocurrency lending platform Celsius Network halted withdrawals from their platforms. According to data site CoinMarketCap, the value of the cryptocurrency market fell below $1 trillion on June 13 for the first time since January 2021, reaching as low as $926 billion. The global cryptocurrency market peaked at nearly $3 trillion in November 2021, but the market continues to spiral downward, the report said.