Coinbase CEO Brian Armstrong announced today that the exchange was laying off 1,100 employees immediately. This reduces the company’s workforce by 18% not long after reaching more than 2,500.
Key Takeaways
- Coinbase lays off 1,100 employees to cut expenses, citing economic conditions and the rate of growth over the last year.
- Coinbase grew more than 200% year-over-year in an industry that is volatile.
- Both the stock and cryptocurrency markets are affecting Coinbase.
Coinbase is one of the largest cryptocurrency exchanges and one of the few registered to operate in the U.S. The company has seen exponential growth in the last few years, following the phenomenal growth of the cryptocurrency industry.
On June 14, 2021, CEO Brian Armstrong announced in a company blog post and notifications to affected employees that the exchange had to lay off 18% of its workforce due to economic circumstances, overhiring, and managing costs during a downturn in the market.
Indicating a recession is on the horizon, Armstrong said, “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.”
“Coinbase has survived through four major crypto winters, and we’ve created long term success by carefully managing our spending through every down period,” he added.
Additionally, he believes the company grew too fast over the last year, as it experienced more than 200% growth. Armstrong admits the company may have gotten ahead of itself while trying to keep up with the opportunities that have presented themselves over the last year.
The company is giving affected employees 14 weeks of severance pay, health insurance, and placement assistance.
What Prompted the Layoffs?
Crypto companies are worried about liquidity and solvency. Crypto.com and BlockFi announced on June 13, 2022, that they were letting employees go. BlockFi laid off one-fifth of its workforce, and Crypto.com let 260 people go—close to 5% of its workforce.
The layoffs are not a knee-jerk reaction to market conditions. Coinbase CEO Armstrong said company leadership has been hashing out costs for the last month. Cryptocurrency trading is one of the key services and money-makers provided by the exchange, and if the looming cryptocurrency winter is similar to the last one, cryptocurrency trading will take a hit. One of Coinbase’s key services is trading, so it makes sense for the company to be prepared to weather the storm.
The Bottom Line
Coinbase (COIN) is a publicly-traded company listed on Nasdaq. Its business model also centers on cryptocurrency; because both markets are declining, the company is feeling the effects of a decline on two fronts.
The company appears to have been preparing for such a move for some time. The company’s CEO warned customers and investors in May that they might lose cryptocurrency if Coinbase went bankrupt, demonstrating that the company was anticipating a downturn.