Coinbase will cut 20% of its workforce in its second round of major layoffs

Brian Armstrong, Co-Founder and CEO of Coinbase Inc.

David Paul Morris | Bloomberg | Getty Images

Coinbase is cutting about a fifth of its workforce as it looks to conserve cash during the cryptocurrency market downturn.

The exchange plans to reduce 950 Jobs, according to a blog post published Tuesday morning. CoinbaseThe company, which had about 4,700 employees at the end of September, cut 18% of its workforce in June, citing the need to control costs and growth “too quickly” during the bull market.

“In retrospect, we should have done more,” CEO Brian Armstrong told CNBC in a phone interview. “The best thing you can do is react quickly once information becomes available, and that’s what we’re doing in this case.”

Coinbase said the move would result in new expenses of between $149 million and $163 million for the first quarter. According to new regulatory filings, the layoffs, along with other restructuring measures, will reduce Coinbase’s operating expenses by 25% for the quarter ending in March. The cryptocurrency company also said it expects full-year adjusted EBITDA losses to be within the “scary” range of $500 million previously set last year.

After looking at various stress tests for Coinbase’s annual revenue, Armstrong said, “it became clear that we would have to cut costs to increase our chances of doing well in every scenario,” and that there was “no way” to do that without reducing headcount. . The company will also close several projects with “less likely success”.

Cryptocurrency markets have been rocked in recent months following the collapse of one of the biggest players in the industry, FTX. Armstrong cited FTX and its founder, Sam Bankman-Fried, as pointing to the collapse and increased pressure on the sector from “unscrupulous actors in the industry”.

“The FTX spill and the resulting contagion created a black eye for the industry,” he said, adding that more “shoes are likely to drop.”

“We may not have seen the last of it — there will be increased oversight of various companies in the space to make sure they are following the rules,” Armstrong said. “It’s a good thing in the long term. But in the short term, there’s still a lot of market fear.”

Cryptocurrencies have suffered along with technology stocks as investors shy away from riskier assets amid a broader economic downturn. Bitcoin is down 58% in the past year, and Coinbase shares are down more than 83%.

The end of the growing season

Coinbase joins the chorus of other tech companies cutting jobs after going on a hiring spree during the Covid pandemic. Last week, Amazon It said it would cut 18,000 jobs, more than initially estimated last year at the online retailer. Salesforce reduced the number of heads by more than 7000 or 10%. After Elon Musk took over as CEO last year, he cut nearly half of Twitter’s workforce and Meta More than 11 thousand jobs or 13% were cut. Crypto companies Genesis, Gemini, and Kraken have also cut workforces.

“Every company in Silicon Valley felt that we were just focused on growth, growth, growth, and people were almost using headcount as a symbol of how far they’ve come,” Armstrong said. “Now the focus is on operational efficiency – it’s a healthy thing for the ecosystem and the industry to pay more attention to these things.”

Earlier last year, Coinbase said it planned to add 2,000 jobs in product, engineering and design. Armstrong said he’s now trying to change the culture at Coinbase to “get back to our startup roots” of small, fast-moving teams.

Coinbase went public in April 2021 and has seen its share price plummet since then. The stock is trading below $40 after hitting $341 in its public debut. Due in 2031, Coinbase debt continues to trade at around 50 cents on the dollar. At the end of September, the company still had about $5 billion in cash and equivalents.

Coinbase said it will email affected employees to their personal accounts and revoke access to company systems. Armstrong admitted the latter “feels abrupt and harsh” but “given our responsibility to protect customer data, it’s the only prudent option.”

Despite the industry’s domino effect of bankruptcies and a marked decline in trading volume, Armstrong insisted that the industry was not going away. He said the demise of FTX would benefit Coinbase as its biggest competitor has now been wiped out. Regulatory clarity may also emerge, which Armstrong said “confirms” the company’s decision to build and go public in the US.

“If you look at the Internet era, the best companies have gotten stronger with strict cost management,” he said. “That’s how it’s going to be here.”

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