Coinbase Global (COIN) is laying off approximately 1,100 people as part of a cost-cutting initiative, the firm announced in a filing on Tuesday. In May, Coinbase said it was reducing its hiring targets and would cancel new employment offers. Brian Armstrong, the CEO of Coinbase, announced that the firm would reduce its global staff by approximately 18% to maintain a healthy company during this economic crisis.
Coinbase lays off 1,100 employees
The cryptocurrency market has taken a nosedive in recent weeks, with investors shifting their money away from digital currencies and towards assets that promise higher or safer returns. The value of the bitcoin market fell below $1 trillion early Tuesday morning.
Following the inevitable market trend, Coinbase, a cryptocurrency exchange based in the United States, has chosen to cut its losses. Brian Armstrong, the CEO of Coinbase, explained why the company made the decision it did in great detail. He began by stating:
Today, I am making the difficult decision to reduce the size of our team by about 18%, to ensure we stay healthy during this economic downturn. I want to walk you through why I am making this decision below, but first, I want to start by taking accountability for how we got here. I am the CEO, and the buck stops with me. Brian Armstrong.Brian Armstrong.
Coinbase plans to reduce the number of workers by about 18% as of June 10. After that, Coinbase will have approximately 5,000 total workers by the end of the current quarter, according to its latest filing with SEC. It also stated that it expects the strategy to be implemented by the end of the second quarter.
Coinbase is set to incur $40 million to $45 million in total cost savings, according to reports. The firm anticipates taking the charges in the second quarter of 2022. The blog post also claimed that the business had expanded too rapidly.
By the beginning of 2021, Coinbase had 1,250 employees. In the early stages of the bull market, crypto products were gaining popularity at an exponential rate. There was a new use case created every week as cryptocurrencies gained traction. For that reason, Brian claimed:
We saw the opportunities, but we needed to massively scale our team to be positioned to compete in a broad array of bets. It’s challenging to grow at just the right pace given the scale of our growth (~200% y/y since the beginning of 2021). While we tried our best to get this just right, in this case, it is now clear to me that we over-hired.Brian Armstrong.
In response to the news, Mizuho decreased its revenue projections for Coinbase and slashed its price target from $60 to $45. It stated that reducing employees may influence efforts to develop new sources of income, which could lead to a pricing battle with rivals as competition heats up.
Crypto winter spreads wide and deep leaving behind a negative trail
The cryptocurrency market has been in its most severe downturn for over two years. According to CoinMarketCap, the Bitcoin price today is 20,250.71 USD, with a trading volume of 44,347,651,899 USD. Bitcoin has dropped 9.31% in the last 24 hours. It includes a circulating supply of 19,067,956 BTC coins and a max. quantity of 21,000,000 BTC coins.
Coinbase has not avoided commenting on the current crypto winter. According to the entity, after a decade-long economic expansion, global markets appear to be entering a recession. It stated that the recession may lead to another cryptocurrency winter and might last for months.
In the past, when crypto winters occurred, trading income (Coinbase’s primary source of revenue) plummeted dramatically. While it’s difficult to predict the economy or the markets, they intend to think ahead so that they may keep operating the company in whatever scenario arises.
During these trying times, the exchange also announced that it provided a separation package. Job placement services, mental health counseling for all staff members for four months, and other perks will be offered to all affected workers.
Employees of crypto firms working in the United States may be eligible for up to four months’ worth of free health coverage. In addition, they may be entitled to 14 weeks’ pay plus two extra weeks for each year worked with Coinbase.
According to reports, the mass layoff comes after Coinbase secured US$549 million in venture capital over 17 rounds. It also bought 22 firms, including btcTurk, in April 2018 for US$3.2 billion.
Coinbase’s stock has tumbled more than 80% this year as the steep plunge in cryptocurrency values has harmed the exchange’s transaction volumes. On Tuesday morning, after the layoff news was released, Coinbase shares climbed about 1 percent in pre-market trading. Shares fell nearly 3% to $50.40 throughout regular trading.
Coinbase is the most recent in a string of crypto firms to announce job cuts. On Monday, BlockFi announced plans to reduce its staff by 20%. Crypto.com also stated that it would eliminate roughly 260 positions.
Before that, Gemini, the Winklevoss-led exchange and custodian, announced it would cut 10% of its staff. Rain, a Middle Eastern exchange, said it was also eliminating dozens of jobs.
However, with some crypto exchanges crumbling under strain and forcing staff to leave, Binance‘s CEO has said the firm is on a hiring spree. According to Yi He, Binance is offering 2,000 opportunities to qualified individuals. Despite the continuing bloodbath in the market, the CEO of the world’s largest cryptocurrency exchange assured investors that his company has a “very healthy war chest.”
Bitcoin dropped to a new 18-month low on Wednesday, dragging down other small cryptocurrencies in the process, as the recent cryptocurrency sell-off showed no indication of letting up. The situation doesn’t look to be improving. Moreover, the United States Securities and Exchange Commission (SEC) is reportedly investigating how cryptocurrency exchanges attempt to prevent insider trading as several crypto exchanges enter preservation mode.