Key information
- Coinbase announced it will cut 20% of its workforce, after reducing staff by 18% in June.
- The company trades with a market capitalization under $10 billion, more than 90% below its IPO price in April 2021.
- CEO Brian Armstrong sold 2% of his stake last October when shares traded around $63; the stock is now near $38.
- Armstrong warned more pain could follow for the crypto market.
- Prices have risen so far this year amid optimism that inflation is easing.
Coinbase announced another large round of layoffs today. In a blog post released Tuesday morning, the company revealed cuts that will eliminate roughly 950 additional roles. Combined with the 18% workforce reduction in June, Coinbase has let go about 35% of its employees over the past six months.
“With perfect hindsight, we should have done more earlier. The best thing you can do is act quickly when new information becomes available, and that’s what we’re doing here,” CEO Brian Armstrong told CNBC.
Why is Coinbase cutting staff again?
In October I published a detailed review of the exchange after it emerged that CEO Armstrong sold 2% of his stake. At that time Coinbase shares were trading around $63; they now trade near $38. If you thought Bitcoin had a rough ride, Coinbase has fared even worse. The stock sits more than 90% below its IPO price.
The company’s market capitalization is currently under $10 billion, versus a brief peak near $86 billion on its first trading day.
Coinbase said the latest cuts, combined with other restructuring measures, will reduce operating expenses by about 25%. However, the company expects a one-time increase in operating costs of $149–$163 million in the first quarter tied to the layoffs.
“It was clear we needed to reduce spending to improve our chances of performing well across scenarios,” Armstrong added, confirming there was “no way” to achieve those improvements without layoffs. He also said the firm will wind down several projects with a lower probability of success.
Could crypto get worse?
Although crypto markets started the year strongly on improving macro data and signs of easing inflation, Armstrong warned that significant fear remains after the collapse of FTX and that there are likely “more shoes to drop” in terms of contagion within the sector.
Layoffs haven’t been limited to crypto. Major technology firms such as Amazon, Salesforce and Meta have also cut thousands of jobs in recent months. Tech is particularly sensitive to interest rate pressures because valuations often reflect discounted future growth; higher rates punish those expectations.
Coinbase, however, made specific mistakes. A noticeable lack of risk management around Bitcoin exposure—given how closely the company’s business is tied to crypto prices—has been costly. A quick comparison shows Bitcoin and Coinbase stock have moved closely in tandem.
The initial round of layoffs in June came only four months after the company spent $14 million on Super Bowl advertising, a choice that now looks like a peak-timing signal for the industry. Other crypto firms, including FTX and Crypto.com, also spent heavily on high-profile ads. Armstrong acknowledged in the first round of cuts that the company had expanded too quickly.
What’s next for crypto?
For the crypto sector, this announcement is a reminder rather than a turning point: it underscores the damage of the past year. Coinbase was a bellwether for the industry—the first high-profile crypto company to list publicly when many expected others to follow.
The market landscape has shifted dramatically. To see a sustained recovery in crypto prices, the macro backdrop needs to ease; in particular, the period of restrictive monetary policy must give way to a more accommodative environment. Crypto is traded as a high-risk asset class and was buoyed over the past decade by very loose monetary conditions and ultra-low interest rates.
That tailwind has diminished. Still, recent signs that inflation may be moderating have renewed hopes that the Federal Reserve could return to a more neutral policy stance sooner than expected. If that happens, investors might begin to consider a renewed upward trend for crypto assets.
For now, most market participants remain cautious. Key US inflation data due later this week will be watched closely for signals about the path of monetary policy and the potential impact on risk assets, including cryptocurrencies.