Coinbase announced on Tuesday that it will lay off about 25% of its staff, about 950 people. The cut comes amid a prolonged bear market for crypto and the collapse of major companies like FTX, with CEO Brian Armstrong writing in a blog post that further contagion is likely after the past few months.
Coinbase has long been an established player in the crowded landscape of renegade crypto companies, buoyed by quarterly reports as one of the few publicly traded centralized exchanges.
Last week, the New York Department of Financial Services announced that it had reached a $100 million settlement with Coinbase over failures in the exchange’s compliance program, which some observers saw as a sign that it was committed to long-term regulation.
Despite Coinbase’s efforts, Crypto Winter has hit the company hard — its stock has fallen nearly 90% since November 2021, and the exchange reported weak third-quarter earnings in November, including a nearly 28% drop in net revenue.
The only bright spot is the company’s ownership of USDC, a stablecoin pegged to the US dollar, which Coinbase owns through a consortium with Circle. Due to rising interest rates, Coinbase has been able to collect revenue on its holdings, with “interest income” rising to $101.8 million in the third quarter of 2022, from just $32.5 million in the previous quarter.
Layoffs have followed economic turmoil. In May, as the collapse of TerraUSD rocked the crypto landscape, Coinbase announced it would slow down hiring after announcing it would triple its headcount in February. In June, the company laid off about 1,100 employees, then the equivalent of about 18% of its workforce, with Armstrong admitting that the exchange was growing too fast.
Armstrong acknowledged the current economic headwinds in a blog post Tuesday, writing that tech companies have focused too much on increasing the number of employees as a metric for success.
“Especially in this economic environment, it is important to shift the focus to operational efficiency,” he said.
The layoffs have rippled throughout the industry. In December, CoinDesk reported that more than 26,000 jobs will be lost in 2022, and the trend will continue until 2023. On January 5, Reuters reported that the crypto company Genesis cut 30% of its workforce and that the bank focused on crypto Silvergate has been closed. 40% of its staff died.
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