Coinbase to Lay Off 18% of Staff as Cryptocurrencies Continue to Struggle

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Cryptocurrency exchange Coinbase Global Inc. COIN -1.15% said it is cutting almost a fifth of its staff because the company had grown too quickly and a potential recession could lead to another crypto winter.

The company said Tuesday it will reduce its workforce by 1,100 employees, or about 18% of its staff, as part of its efforts to manage operating expenses. In a letter to all employees, Chief Executive Brian Armstrong said our employee costs are too high to effectively manage this uncertain market.

We appear to be entering a recession after a 10+ year economic boom, Mr. Armstrong wrote. A recession could lead to another crypto winter, and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly.

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The biggest cryptocurrency exchange in the US has struggled to hang onto users this year as the frenzy in digital assets cooled and markets have been rocky. In May, Coinbase said it lost hundreds of millions of dollars in the first quarter as its trading fees dropped sharply. The number of Coinbases transacting users also slid, and the company said it expected trading volumes and users to drop again in the second quarter.

Since the earnings report, things have gotten worse for cryptocurrency prices, Coinbases stock and markets in general. The price of bitcoin is down roughly two-thirds from its high over the past year. On Monday, the S&P 500 stock index entered a bear market as investors continued to unload risky assets while the Federal Reserve tries to tame the highest inflation in the US in decades. Investors expect the Fed to further raise interest rates, sapping appetite for assets seen as risky, like cryptocurrencies and technology stocks.

Shares of Coinbase traded at $52.18 on Tuesday, up 0.4%, after Coinbase posted the notice of layoffs as part of a Securities and Exchange Commission filing. When Coinbase went public in April of last year, the first trade of its stock was at $381.

WSJs Dion Rabouin explains why Wall Street is now betting big on crypto and what that means for the new asset class and its future. Composite photo: Elizabeth Smelov

Last week, Mr. Armstrong tweeted criticism of a petition by Coinbase employees to remove some executives, not including Mr. Armstrong, from the company because the executive team has recently been making decisions that are not in the best interests of the Company, its employees , and its shareholders.

In a June 10 Twitter thread that spanned 16 tweets, Mr. Armstrong said, if you have no confidence in the execs or CEO of a company then why are you working at that company? Quit and find a company to work at that you believe in!

Coinbase said it expects to have 5,000 staffers following the layoffs and that laid-off employees will get at least 14 weeks of severance pay.

Write to Caitlin Ostroff at [email protected] and Nathan Becker at [email protected]

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