Brian Armstrong, Co-Founder and CEO of Coinbase Inc.
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Coinbase is shedding about a fifth of its workforce to save cash during the crypto market downturn.
The exchange plans to short 950 Jobs, according to a blog post published Tuesday morning. coin basewhich employed around 4,700 people at the end of September has already shed 18% of its workforce in June due to the need to control costs and grow “too fast” during the bull market.
“In retrospect, we should have done more,” CEO Brian Armstrong said in a phone interview with CNBC. “The best thing you can do is act quickly as soon as information becomes available, and that’s exactly what we’re doing in this case.”
Coinbase said the move would result in new spending of between $149 million and $163 million for the first quarter. The layoffs, along with other restructuring measures, will reduce Coinbase’s operating expenses by 25% for the quarter ended March, according to a new regulatory filing. The crypto firm also said it expects full-year adjusted EBITDA losses to be within a “guard rail” of $500 million set last year.
After looking at various stress tests for Coinbase’s annual revenue, Armstrong said, “It became clear that we needed to reduce spending to increase our chances of doing well in each scenario,” and there was “no way” to do so to do without reducing the number of employees. The company will also discontinue several projects with “lower probability of success”.
Cryptocurrency markets have been rocked in recent months following the collapse of one of the industry’s biggest players, FTX. Armstrong pointed to these consequences and the increasing pressure on the sector thanks to “unscrupulous players in the industry” referring to FTX and its founder Sam Bankman-Fried.
“The FTX collapse and resulting contagion has given the industry a black eye,” he said, adding that there are likely more “shoes to drop.”
“We may not have seen the last of this — there will be increased scrutiny of different companies in the industry to make sure they’re following the rules,” Armstrong said. “In the long term, that’s a good thing. But in the short term, there’s still a lot of market anxiety.”
Cryptocurrencies have suffered along with tech stocks as investors flee riskier assets amid a broader economic downturn. Bitcoin is down 58% over the past year, while Coinbase shares are down more than 83%.
End of a growth era
Coinbase joins a chorus of other tech companies Downsizing after a hiring frenzy during the Covid pandemic. Last week, Amazon said it would cut 18,000 jobs, more than the online retailer originally estimated last year Foreclosure reduced its workforce by more than 7,000 or 10%. Elon Musk cut about half of Twitter’s workforce after taking the helm as CEO last year, and Meta More than 11,000 job cuts or 13%. Crypto companies Genesis, Gemini and Kraken have also reduced their workforce.
“Every company in Silicon Valley felt like we were just focused on growth, growth, growth, and employees almost used their headcount as a symbol of how much progress they were making,” Armstrong said. “The focus now is on operational efficiencies – it’s a healthy thing for the ecosystem and the industry to be more focused on those things.”
Earlier last year, Coinbase had said It was planned to create 2,000 jobs in product, engineering and design. Armstrong said he’s now trying to change the culture at Coinbase to “go back to its startup roots” of smaller teams that can move quickly.
Coinbase went public in April 2021 and has since seen its share price fall. The stock is trading below $40 after rising to $341 on its public debut. Coinbase debt maturing in 2031 continues to trade at around 50 cents per dollar. The company had approximately $5 billion in cash and cash equivalents at the end of September.
Coinbase said it would email affected employees on their personal accounts and revoke access to company systems. Armstrong acknowledged that the latter “feels sudden and harsh,” but “it’s the only sensible decision given our responsibility to protect customer information.”
Despite the industry’s domino effect of bankruptcies and a significant drop in trading volume, Armstrong steadfastly argued that the industry was not going away. He said FTX’s demise would ultimately benefit Coinbase as their biggest competitor is now wiped out. Regulatory clarity could also emerge, and Armstrong said it “confirms” the company’s decision to set up and go public in the United States. The CEO likened the current environment to the dot-com boom and bust.
“If you look at the internet age, rigorous cost management has made the best companies even stronger,” he said. “It’s going to happen here.”
https://www.cnbc.com/2023/01/10/coinbase-to-slash-20percent-of-workforce-in-second-major-round-of-job-cuts.html Coinbase plans to shed 20% of its workforce in the second major round of job cuts