Coinbase to cut a fifth of its workforce as the crypto crisis deepens

[ad_1]

Coinbase, the U.S.-listed cryptocurrency exchange, is to cut a fifth of its workforce as the crisis sweeping the digital asset market triggers another round of industry job cuts.

Chief Executive Brian Armstrong said on Tuesday that Coinbase would cut 950 jobs and shut down several riskier projects to ensure it could weather downturns in the crypto market.

The move comes as the biggest players in the industry are rocked by a prolonged decline in the prices of popular coins such as bitcoin, while consumer confidence has been further shaken by the implosion of derivatives exchange FTX in november.

The job cuts at Coinbase follow major job losses already announced this year at rival exchange Huobi, U.S. crypto-focused bank Silvergate and digital asset lender Genesis.

This is the second major round of cutbacks at Coinbase, which cut its workforce by about a fifth, or about 1,100 employees, last summer. Other exchanges also cut jobs six months ago to combat the sharp decline in trading volumes as token values ​​fell sharply.

Armstrong said the decision to cut more jobs was based on his projected annual revenue schedule. As we reviewed our 2023 scenarios, it became clear that we needed to cut expenses to increase our chances of doing well in each scenario, he wrote on a corporate blog.

Coinbase added that earnings before interest, taxes, depreciation, and amortization for 2022 would be in line with its previous guidance for a loss of no more than $500 million. However, it will incur between $149 million and $163 million in restructuring expenses for its latest job cuts, including $58 million to $68 million in cash charges. Coinbase shares rose 7% in New York after rising 15% on Monday.

While this creates short-term fill for Coinbases’ declining operating leverage, it does not help solve problem number one: deteriorating volumes amid retail crypto trading fatigue, said analysts at Mizuho Securities.

Conservatively assuming catch rates and volumes remain at current levels, we are still seeing a more than 30% decline in 2023 consensus sales.

The announcement adds another layer to Coinbases’ rocky start to 2023. Last week, it reached a $100 million settlement with New York regulators over anti-money laundering failures, including a backlog of unexamined transactions and a reliance on social media profiles for customer identification. The exchange said the failures were historic and added that it had taken substantial steps to address them.

Coinbases’ announcement comes as the collapse of FTX and the arrest of founder Sam Bankman-Fried continue to ripple through the crypto industry. The FTX implosion prompted regulators to step up their scrutiny across the industry and sparked mass withdrawals from the platforms by investors concerned about the financial health of crypto companies.

Dark times also weed out bad companies, as seen right now, Armstrong said, adding that Coinbase was well capitalized and cryptocurrencies weren’t going anywhere.

This story has been edited to clarify that Coinbase plans to cut 20% of its staff in the latest round of job cuts.

Video: Cryptocurrencies: How Regulators Lost Control

[ad_2]