Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Popular exchange Coinbase recently announced an 18% staff layoff to strengthen its financial position in the face of a crypto crunch.
Coinbase (NASDAQ: COIN) is reportedly planning a second major round of staff downsizing following an 18% headcount reduction last June. The latest Coinbase layoff comes amid a sustained crypto market downturn as the exchange tries to preserve cash. The major exchange intends to cut 950 jobs (20%). According to chief executive officer Brian Armstrong:
“With perfect hindsight, looking back, we should have done more. The best you can do is react quickly once information becomes available, and that’s what we’re doing in this case.”
As of September ending last year, Coinbase had a headcount of approximately 4,700 employees following the June reduction. The prominent American crypto exchange claims it grew too quickly during the bull market.
Coinbase also estimated that its latest layoff would incur new expenses of up to $163 million for the first quarter. However, the downsizing and other restructuring measures will lower the exchange’s operating expenses by 25% for the same period. Furthermore, Coinbase expects adjusted EBITDA losses for 2023 to fall within last year’s previously-set $500 million safety net.
Coinbase Views Layoff as Necessity Following FTX-triggered Crypto Crunch
Armstrong stresses that Coinbase had to slash its workforce again to increase its chances of thriving in every “stress test scenario.” In addition, he pointed to the recent pressure on the crypto industry wrought by “unscrupulous actors” such as Sam Bankman-Fried and FTX. As Armstrong put it, “The FTX collapse and the resulting contagion has created a black eye for the industry.” He also suggested that the worst is yet to come. According to the Coinbase CEO’s estimations:
“We may not have seen the last of it — there will be increased scrutiny on various companies in the space to make sure that they’re following the rules. Long term, that’s a good thing. But short term, there’s still a lot of market fear.”
Coinbase also announced that it plans to shut down numerous projects with a lower chance of success.
Coinbase shares closed 12% higher on Tuesday following the downsizing report. The crypto company is the latest tech platform to contract the size of its staff force after extraneous hires during the Covid pandemic. Tech stocks have also taken a hammering alongside 2022’s crypto contagion as investors flee riskier assets amid a far-reaching economic downturn. For instance, leading crypto Bitcoin (BTC) is down 58% within the past year, while Coinbase stock is at an 83% drawdown.
Tech Companies Downsize to Ensure Survival & Competitiveness
On Wednesday, Amazon (NASDAQ: AMZN) announced that it would cut 18,000 jobs, surpassing its initial estimation in 2022. The announcement came after an external leak by one of Amazon’s employees prompted the tech giant to reveal its downsizing plans. As a result, Amazon CEO Andy Jassy suggested that the company may not have forewarned those directly impacted by the decision.
Last week, Salesforce (NYSE: CRM) also announced that it would reduce its personnel by 10%. In addition, Twitter also reduced its headcount by 50% following Elon Musk’s takeover.