Coinbase confirms the end of the era of insolent crypto growth

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The horizon remains uncertain for Coinbase.

The cryptocurrency exchange is still unable to recover from the bad patch that the cryptocurrency sector has been going through for a year.

The cryptocurrency market has lost nearly $2.1 trillion from its all-time high of $3 trillion reached in November 2021. The market is currently worth some $886 billion according to data firm CoinGecko.

Bitcoin, the most popular digital asset, has lost 75% of its value from its all-time high of $69,044.77 reached on November 10, 2021. BTC prices are currently trading around $17,233.76. The prices of the king of cryptocurrencies have relatively stabilized since the year 2023.

The biggest problem in the young blockchain-powered financial services industry is mistrust. General public distrust caused by a succession of scandals after the 2021 crypto craze.

‘Difficult decision’

Last May, sister tokens Luna and UST collapsed overnight, causing billions of dollars in losses for retail and institutional investors. This disaster caused a credit crunch that forced hedge fund Three Arrows Capital, or 3AC, into liquidation. Imminent crypto lenders like Voyager Digital and Celsius Network have filed for Chapter 11 bankruptcy.

This game of dominoes exposed the incestuous relationships and interdependence between players in the crypto space. Customers of these platforms, who lost their savings, were often unaware that their money was often lent to other businesses.

In November, Sam Bankman-Fried’s crypto empire collapsed. This disaster was a real bombshell as the former trader was the institutional face of crypto. He had rescued many businesses during the credit crunch and his FTX cryptocurrency exchange was valued at $32 billion last February.

The FTX rout has yet to reveal all of its casualties. The biggest, however, remains the confidence in the crypto industry which has completely collapsed. Retail investors have fled the sector, while institutional investors are much more cautious, especially as a recession is expected this year.

This is confirmed by Coinbase. the platform has just announced the loss of nearly a thousand additional jobs. Coinbase (COIN) – Get Free Report will eliminate 20% of its current workforce, or about 950 jobs.

“We need to ensure that we have the appropriate operational efficiencies to weather downturns in the crypto market and seize opportunities that may emerge,” CEO Brian Armstrong told employees in a January 10 blog post. “As a result, I have made the difficult decision to reduce our operating expenses by approximately 25% T/T, which includes the layoff of approximately 950 people.”

‘Sore’

“This is the first time we’ve seen a crypto cycle coincide with a broader economic downturn,” Armstrong continued. “As we reviewed our 2023 scenarios, it became clear that we would need to cut expenses to increase our chances of doing well in each scenario. had no way of reducing our expenses significantly enough, without taking into account changes in staffing.”

Coinbase will therefore stop several projects.

All of these actions will result in a charge of between $149 billion and $163 billion, the company said in a regulatory filing. These charges are mainly severance and other severance payments and will be included in the results of the first quarter of 2023.

The crypto company also said it expects full-year adjusted EBITDA losses to be below the $500 million “safeguard” set last year.

The new job cuts are the second wave of job cuts by Coinbase in less than a year. Last June, the company cut 18% of jobs, or 1,000 people who were made redundant.

These layoffs mark the end of an era of abundance and insolent growth for the crypto industry that had benefited Coinbase. The platform made its IPO in April 2021. The shares had thus risen to 341 dollars.

But they fell sharply last year. Currently, the stock price is around $38, which means an 89% decline.

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