Coinbase will be cutting a fifth of its workforce following an earlier staff reduction in June 2022 in an attempt to preserve its assets as the crypto industry faces a severe downturn.
Some of the largest firms in Silicon Valley in general have been delivering a steady stream of job cut announcements in recent months.
The company plans to cut around 950 positions for the quarter ending in March, according to a blog post written by CEO Brian Armstrong, on Jan. 11.
The blog post said that the firm would email the affected employees on their personal accounts and revoke access to company systems.
Coinbase had already slashed 18 percent of its workforce last June in a bid to save on operational costs, with roughly 4,700 employees remaining at the end of September after the cuts.
The new layoffs will result in reduced expenses of $149–163 million for the first quarter of 2023, said the company’s CEO.
That along with other restructuring moves would bring operating expenses down by 25 percent.
Armstrong also added that several projects with a “lower probability of success” would be shut down.
The exchange expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) losses for 2023 to stay within a prior $500 million “guardrail” set last year.
Coinbase CEO Says That Crypto Will Survive the Latest Crisis
He also blamed recent pressure in the crypto sector on “unscrupulous actors in the industry,” referring to FTX and its disgraced founder Sam Bankman-Fried.
The industry was rocked following the collapse of FTX, one the industry’s biggest players, in an $8 billion fraud scheme and the subsequent investigation by the U.S. Department of Justice and the Securities and Exchange Commission (SEC).
Armstrong said that the collapse of FTX would actually benefit Coinbase, since its largest competitor is now out of the picture.
“Coinbase is well capitalized, and crypto isn’t going anywhere. In fact, I believe recent events will ultimately end up benefiting Coinbase greatly (a large competitor failing, emerging regulatory clarity, etc.), and they validate our long-term strategy,” said Armstrong.
He said that a focus on better crypto regulations and oversight would validate the company’s decision on going public.
Despite the wave of bankruptcies like that of Voyager Digital and FTX last year and a drop in crypto trading volume, the Coinbase CEO insists that the industry is not going anywhere, and he likened the situation to the dot.com boom and bust in the early 2000s.
“Just like we saw with the internet, the most important companies not only survive but thrive during down markets by being rigorous with cost management, and continuing to build innovative products,” noted Armstrong.
Crypto Continues to Fall Dramatically Last Year, as Market Remains Shaky
Cryptocurrencies have taken a beating along with the tumble in tech stocks, as traders flee riskier investments in the middle of a worldwide economic downturn.
Bitcoin has lost 58 percent of its value in the past year, while Coinbase shares have slumped more than 83 percent.
After Coinbase went public in April 2021, its share price has since plummeted, with the stock trading below $40, after surging as high as $429.54 on the day of its debut on the Nasdaq, reported CNBC.
Coinbase’s debt-holders saw their bonds, which mature in 2031, trade near $0.50 on the dollar following the collapse of FTX.
The crypto firm still had cash and equivalents of roughly $5 billion at end of the third quarter.
After reviewing multiple scenarios for the company’s annual revenue estimates, Armstrong said, “It became clear that we would need to reduce expenses to increase our chances of doing well in every scenario” and that there was “no way” to do so without reducing headcount.
Big Tech and Crypto Firms Witness Massive Job Losses
Coinbase joined other tech companies in announcing job cuts, after many firms went on a hiring spree during the pandemic.
Armstrong admitted that the crypto exchange had grown “too quickly” during the bull market and was overly optimistic.
“Over the past 10 years, we, along with most tech companies, became too focused on growing headcount as a metric for success. Especially in this economic environment, it’s important to shift our focus to operational efficiency,” said Armstrong.
Coinbase had plans in February 2022 to add 2,000 new jobs to its product, engineering, and design team.
Armstrong wrote that he now wants the company to “return to small, nimble teams that are able to get more done” and can move quickly, as they return to their start-up roots.
Meanwhile, Amazon said it would cut 18,000 jobs last week, more than initially planned, wrote CEO Andy Jassy in the company’s blog.
Salesforce said it would also cut its staff by more than 7,000, or 10 percent, in a filing with the SEC on Jan. 4.
At least 50 percent of Twitter employees were cut after Elon Musk became its CEO last year, while Meta terminated more than 11,000 positions, or 13 percent of its staff.
Crypto firms Genesis, Gemini, and Kraken have also reduced their workforces due to the downturn in tech and crypto.