Coinbase founder and CEO Brian Armstrong attends Consensus 2019 at Hilton Midtown on May 15, 2019 in New York City.
Steven Ferdman | Getty Images
Coinbase is laying off almost a fifth of its workforce amid a collapse in its stock and crypto prices.
The exchange of cryptocurrencies will reduce 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has about 5,000 full-time employees, which translates into a reduction in the workforce of about 1,100 people.
Coinbase shares have fallen about 7% before the market.
CEO Brian Armstrong pointed to a possible recession and the need to manage Coinbase’s burning rate and increase efficiency. He also said the company grew “too fast” during a bullish market.
“It looks like we’re entering a recession after a 10-year economic boom. A recession could lead to another cryptocurrency winter and could last a long time,” Armstrong said, adding that past cryptographic winters have resulting in a significant decrease in trade. activity. “While it is difficult to predict the economy or markets, we always plan for the worst in order to be able to operate the business in any environment.”
Coinbase had initially said it was stopping hiring. Two weeks later, the crypto giant announced it would expand the freeze for the “foreseeable future.” Earlier this year, Coinbase said it planned to add 2,000 jobs including products, engineering and design.
“Our employees’ costs are too high to effectively manage this uncertain market, ”Armstrong said. “While we did our best to do well, in this case I am now clear that we hired in excess.”
The news comes during a deep defeat for Coinbase shares. The shares went public through a direct listing last April during a boom in the crypto markets and investors demanding high-growth technology stocks. Coinbase shares have fallen 79% this year and 85% from an all-time high. Meanwhile, bitcoin has dropped close to $ 22,000 and lost 53% of its value this year.
San Francisco-based Coinbase saw a drop in users in the last quarter and a 27% drop in revenue from a year ago. The company makes most of its main line from transaction fees, which are closely tied to business activity.
Employees of Coinbase Global Inc., the largest cryptocurrency exchange in the United States, are watching their listing on the Nasdaq MarketSite jumbotron at Times Square in New York, USA on April 14, 2021.
Shannon Stapleton | Reuters
President and Chief Operating Officer Emilie Choi said it was a “very difficult decision for Coinbase”, but given the economic context, she said “it seemed the most prudent thing to do right now”.
Affected employees received an HR notification. If so, the note was sent to a personal email as Coinbase cut off access to the company’s systems. Armstrong called it “the only practical option” given the number of employees with access to customer information and a way to “make sure not a single person makes a hasty decision that harms the company or itself.” .
Coinbase employees will have access to a talent center to find new jobs in the industry, including Coinbase Ventures portfolio companies. Choi said they would still be “doubling down” in areas such as security and compliance and could be “reorienting” employees toward short-term revenue generators.
“If there are cuts in new product areas, it will be more experimental risk areas in which we are still very optimistic, but in which we do not want to invest in this part of the cycle,” Choi told CNBC. in an interview at the company headquarters.
“We will continue to invest in incredible innovative areas of cryptography that we believe are emerging in the long run, but we will probably do so in a more measured way in this type of environment.”
Coinbase joins dozens of other technology and cryptocurrency companies that are slowing down hiring. Cryptography provider BlockFi said it downgraded 20% of its employees on Monday. Layoffs.fyi open source tracker estimates that more than 5,500 new business and technology jobs have been cut in June alone.
Coinbase’s intent is “to make this a one-time event,” Choi said, adding that the company has $ 6 billion in cash on its balance sheet. The company has lived through several crypto bear markets before, also known as “crypto winters”.
“We will enter any macro environment, any cryptographic winter or whatever comes,” he said. “The reality is, however, that we have to adjust when we feel that there is a very dynamic economic environment.”
Technology companies have been battling low morale and attrition as their actions are affected. Last week, a petition posted on a decentralized publishing platform called for the removal and a “censorship vote” on several Coinbase executives, including Choi.
Coinbase Brian Armstrong drew attention to the petition deleted since then and in a tweet urged employees to resign if they do not believe in the company.
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“We will always encourage our employees to share opinions internally about how we operate as a company, and we have a number of mechanisms in place for them to do so. It is not very clear whether this document comes from the company,” Choi said. . “However, if it did, we are disappointed that those behind it feel the need to break the trust of the company and its co-workers by sharing this information in a way that is clearly designed to generate controversy rather than controversy. ‘a meaningful dialogue “.
Coinbase has no plans to offer additional company capital grants or cash compensation amid falling prices, Choi said. The company offers annual grants, in part so that employees can “mitigate changes” and the volatility of cryptography. For employees and investors, the COO compared it to Amazon or Tesla – a long-term investment with volatility in the meantime.
“We believe that anyone who makes an investment, be it an employee or an investor, will have a good long-term return,” Choi said. “Coinbase is a long-term move: we have a very deep belief in the long-term value of stocks.”