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Coinbase: Considering all the cutbacks in the technology industry, Coinbase will reduce 1/5th of its personnel.

The strategy aims to protect money as the crypto market deteriorates further.

The news

According to a blog post posted on Tuesday morning, the crypto company plans to lay off 950 employees.

After an 18% staff reduction in June, Coinbase had over 4,700 employees by the end of September.

The company attributed the layoffs to cost-cutting efforts and rapid expansion amid the bull market.

“With perfect hindsight, looking back, we should have done more,” said Coinbase CEO Brian Armstrong.

“The best you can do is react quickly once information becomes available, and that’s what we’re doing in this case.”

Endgame

According to Coinbase, the decision would incur additional costs in the first quarter ranging from $149 to $163 million.

For the quarter ending in March, Coinbase’s operating expenses will shrink by 25% as a result of the layoffs and other restructuring initiatives.

Additionally, the company anticipates that its 2023 adjusted EBITDA losses won’t surpass the $500 million “guardrail” it established a year ago.

Brian Armstrong remarked that it was evident they would need to lower spending to improve their chances of surviving each scenario following several stress tests for the annual revenue.

He claimed that cutting back on staff was the only way to accomplish the objective.

Coinbase will also cancel a slew of low-probability projects.

The FTX factor

The FTX collapse significantly impacted around the end of 2022 despite the cryptocurrency market being volatile throughout most of the year.

The strain that FTX and its founder Sam Bankman-Fried put on the cryptocurrency sector was underlined by Armstrong.

“The FTX collapse and resulting contagion has created a black eye for the industry,” said the Coinbase CEO.

“We may not have seen the last of it – there will be increased scrutiny on various companies in the space to make sure that they’re following the rules.”

“Long term, that’s a good thing. But short term, there’s still a lot of market fear.”

Due to investors being wary of riskier assets during the downturn, cryptocurrency and technology stocks have underperformed over the past decade.

Shares of Coinbase have fallen by 83% in the last year, while those of Bitcoin has fallen by 58%.

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Other companies and job cuts

Coinbase and several other tech firms went on a hiring binge at the start of the 2020 pandemic.

But many businesses are now rapidly dismissing their workers.

• Amazon is dismissing 18,000 workers.
• A 10% employee reduction was recently announced by Salesforce
• Elon Musk cut back on half of the Twitter staff
• Over 13% of Meta’s employees were let go
• Fewer people were left employed by crypto firms Genesis, Gemini, and Kraken.

“Every company in Silicon Valley felt like we were just forced on growth, growth, growth, and people were almost using headcount as a symbol of how much progress they were making,” said Armstrong.

“The focus now is on operational efficiency – it’s a healthy thing for the ecosystem and the industry to focus more on those things.”

Coinbase had 2,000 new hires in the product, engineering, and design sectors planned for the beginning of 2022.

Since then, according to Brian Armstrong, he has been working to change Coinbase’s culture to resemble a startup with smaller, more agile teams.

The company

The stock price of Coinbase has decreased since its IPO more than two years ago.

The stock surged to $429.54 upon launch but now trades for less than $40.

On their personal accounts, Coinbase will send emails to employees who are being let go, and access to the systems will be blocked.

According to Brian Armstrong, even though the access limitation seemed excessive, it was their only option for protecting client information.

Armstrong is confident that the cryptocurrency business won’t vanish anytime soon despite a chain reaction of bankruptcies and a decline in transaction volume.

As a result of losing its greatest rival, Coinbase eventually gained the upper hand following the FTX crash.

According to Armstrong, the eventual change in regulatory clarity validates the business’s intention to grow and go public in the United States.

He compared the current state of affairs to the early days of the internet.

“If you look at the internet era, the best companies got even stronger by having rigorous cost management,” said Armstrong.

“That’s what’s going to happen here.”

Reference:

Coinbase to slash 20% of workforce in second major round of job cuts