Key Takeaways
- Coinbase is halting all operations in Japan, citing market conditions.
- Last week the company cut 20% of its workforce, after already reducing staff by 18% in June.
- The stock has risen nearly 50% year-to-date amid the crypto rally but remains about 85% below its all-time high.
- The company faces multiple challenges, and CEO Brian Armstrong sold 2% of his stake in October.
Coinbase has been navigating a difficult period.
As recently as last week, the exchange announced it was laying off 20% of its employees, following an 18% reduction in June. At the time, the company’s market capitalization fell below $10 billion—roughly 90% less than its value when it went public in April 2021.
That restructuring came after CEO Brian Armstrong sold 2% of his shares in October, a move that sparked questions about the company’s outlook and leadership. Since its highly publicized Nasdaq debut, Coinbase was widely seen as a bridge bringing cryptocurrencies into mainstream finance; recent events have challenged that narrative.
Now Coinbase has disclosed another setback: it is suspending all trading operations in Japan, blaming adverse market conditions.
Coinbase Stock Has Rallied
Despite the stream of bad headlines, Coinbase’s stock has been a major winner during the early weeks of 2023, climbing roughly 48% in just 18 days.
The rebound coincides with the largest crypto rally in nine months, which has pushed prices higher across the board. While the share-price recovery is welcome news for investors, it also highlights a core issue for Coinbase—its performance is highly correlated with the broader cryptocurrency market.
Cryptocurrencies are extremely volatile, and that volatility translates into volatile trading volumes and investor interest on exchanges like Coinbase. When crypto prices fall, trading activity and customer engagement decline, which directly hits Coinbase’s revenue.
During the pandemic, low interest rates and aggressive fiscal stimulus helped drive retail participation and a surge in crypto investing. That environment boosted Coinbase’s growth as new users flocked to the platform.
But macro conditions shifted. The total crypto market value fell from about $3 trillion to $800 billion before the recent upswing pushed it over $1 trillion again. That dramatic swing in market capitalization has affected every major exchange.
Why Are Japanese Operations Ending?
Despite recent gains, a broader view shows Coinbase has lost roughly 85% of its value since going public, endured two rounds of layoffs, seen its CEO reduce his stake, and now is pulling out of Japan.
Coinbase customers in Japan have until February 16 to withdraw their assets from the platform. Accounts not closed by that date will have remaining holdings converted to Japanese yen. Coinbase had been working to expand in Japan during the previous crypto winter, which makes this abrupt exit particularly disappointing.
Coinbase is not alone in withdrawing from the Japanese market. Rival exchange Kraken announced last month it would also cease operations in Japan. Kraken had similarly trimmed its workforce—cutting roughly 30% of employees—after the collapse of FTX rattled the industry. These moves underscore the extent to which exchanges remain vulnerable to market downturns and regulatory pressure.
Coinbase’s third-quarter results showed trading volume dropped 44% from the prior quarter. That decline in volumes and customer interest contributed to the share-price slump, the layoffs, and now the shutdown in Japan. Public attention toward the exchange has waned significantly, as reflected in search trends and other public signals.
For Coinbase investors, recent softer macro data and the crypto rebound offer hope that improved conditions will be sustained. If they are not, the recent stock rally may be short-lived and the company will face continued pressure to adapt to a cyclical and often unpredictable market.