Coinbase: Coinbase will lay off 1/5th of its workforce in the wake of all the massive layoffs in the tech sector.
As crypto continues to deteriorate, the strategy seeks to preserve money.
According to a blog post uploaded on Tuesday morning, the crypto exchange company plans to let go of 950 workers.
By the end of September, Coinbase employed over 4,700 employees, from an 18% headcount cut in June.
The organization blamed the layoffs on rapid expansion during the bull market and cost-cutting measures.
“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.”
Coinbase estimates that the approach would result in extra expenses in the first quarter ranging from $149 to $163 million.
Due to the layoffs and other restructuring procedures, Coinbase’s operating expenses for the quarter ending in March will drop by 25%.
The business also expects its 2023 adjusted EBITDA losses to remain within the $500 million “guardrail” it set up last year.
Following multiple stress tests for the annual revenue, Brian Armstrong said that it was evident they would need to cut spending to increase their chances of surviving each scenario.
He asserted that downsizing employees were the only way to achieve the goal.
In addition, Coinbase will scrap many dubious projects.
The FTX factor
Despite the turbulent cryptocurrency market for the majority of 2022, the FTX collapse significantly impacted the year’s conclusion.
Armstrong emphasized the strain FTX and its founder Sam Bankman-Fried had on the crypto industry.
“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.”
Over the past ten years, cryptocurrency and technology companies have lagged due to investors becoming cautious of riskier assets during the downturn.
In the past year, shares of Coinbase have dropped by 83%, while those of Bitcoin has plunged by 58%.
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Other companies and job cuts
At the beginning of the 2020 pandemic, Coinbase and several other tech companies went on a recruiting spree.
However, a lot of companies are increasingly firing their employees.
- Amazon is laying off 18,000 employees.
- Salesforce has announced a 10% staff cut.
- Elon Musk reduced the Twitter staff by 50%.
- More than 13% of Meta’s team was laid off.
- The workforces of Genesis, Gemini, and Kraken, three cryptocurrency companies, have decreased.
“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.”
For the beginning of 2022, Coinbase expected to hire 2,000 new employees in the product, engineering, and design fields.
Brian Armstrong has since been restructuring Coinbase’s mentality to resemble a startup with smaller, more adaptable teams.
Since its initial public offering (IPO) more than two years ago, Coinbase’s stock price has plunged.
Upon introduction, the stock soared to $429.54, but it currently trades for very little: $40.
Employees who are terminated will get emails on their personal accounts from Coinbase, and access to the systems will be suspended.
Brian Armstrong claimed that despite the severe access restriction, it was their only choice for protecting and preserving customer information.
Armstrong is optimistic that despite a cascade of bankruptcies and a drop in transaction volume, the crypto industry won’t go away anytime soon.
Following the FTX catastrophe, Coinbase eventually took the lead after losing its main competitor.
Armstrong claims that the eventual improvement in regulatory clarity validates the company’s ambition to expand and go public in the US.
He made a comparison between the current predicament and the formative 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.”