Key Points
- Coinbase announced it will cut 20% of its workforce, after already laying off 18% in June.
- The company’s market value is under $10 billion, more than 90% below the price at its April 2021 IPO.
- CEO Brian Armstrong sold 2% of his stake last October when the stock traded at $63; today it trades around $38.
- Armstrong warned of continued delays in action or decision-making across crypto markets as participants wait for clarity.
- So far this year prices have been rising amid signs of easing inflation.
Coinbase announced today another significant round of job cuts. A company blog post published Tuesday morning confirmed the layoffs, which affect roughly 950 additional positions. After a previous wave in June that reduced headcount by 18%, the company has now eliminated about 35% of its workforce in the last six months.
“In hindsight we should have done more. The best thing you can do is react quickly as information becomes available, and that’s what we are doing in this case,” CEO Brian Armstrong told CNBC.
Why is Coinbase cutting jobs again?
In October I published an in-depth look at the exchange’s situation when it emerged that CEO Brian Armstrong sold 2% of his holdings. At that time Coinbase traded at $63; today the stock is near $38. If you thought Bitcoin had a rough period, Coinbase has been worse: the stock is down more than 90% from its debut price.
Market capitalization now sits below $10 billion, after briefly reaching about $86 billion on its first trading day.
Coinbase says the latest reductions, together with other structural changes, will lower operating costs by roughly 25%. However, the company expects one-time restructuring charges to increase operating expenses by $149–$163 million in the first quarter.
“It became clear we needed to reduce costs to improve our prospects in all scenarios,” Armstrong said, adding that there was “no way” to achieve the required changes without layoffs. He also confirmed the company will shelve several projects with lower chances of success.
Could conditions worsen across crypto?
Although crypto markets have heated up this year on the back of favorable macroeconomic and inflation news, Armstrong issued a cautionary note: there remains a lot of fear in the market after the collapse of FTX, and it’s likely that “more shoes will drop” as contagion continues to be assessed across the industry.
Layoffs are not unique to crypto. Tech giants such as Amazon, Salesforce and Meta have reduced thousands of roles in recent months. The technology sector is cyclical, and with lower profits and valuations based on discounted future expectations, rising interest rates have been a heavy burden.
Coinbase, however, made strategic errors of its own. A clear lapse in risk management tied to Bitcoin’s price has hurt the company, given how closely its fortunes track crypto markets. A look at price charts shows Coinbase shares and Bitcoin moving largely in tandem.
The first round of layoffs in June came only four months after Coinbase spent $14 million on a Super Bowl advertisement—an expense that, in hindsight, coincided with a peak in crypto sentiment. Other crypto firms spent heavily on the big game too. Armstrong acknowledged during the initial layoffs that the company had scaled up too quickly.
What’s next for crypto?
This announcement by itself does not redefine the industry. It is another data point that highlights the damage of the past year. Coinbase was a bellwether for the industry—the first high-profile crypto company to go public—at a time when many expected other firms to follow.
The environment has changed dramatically. For a meaningful recovery, the macro backdrop must cool, allowing tighter monetary conditions to be eased. Crypto assets are high-risk by nature and were propelled by the last decade’s loose monetary policy; sustained higher rates reversed much of that upside.
That dynamic has moderated. As inflation shows signs of easing early in the year, hope has returned that the Federal Reserve might relax policy sooner than previously expected. Only then, many investors believe, will crypto markets begin to trend upward sustainably.
For now, market participants remain cautious. The next major U.S. inflation data, due Thursday, will be closely watched for clues on how fast monetary policy might shift and what that could mean for crypto prices and industry stability.