The steep drop in the value of Bitcoin made itself felt Tuesday at Coinbase when the crypto exchange’s boss announced an 18% cut in its workforce. The 10-year-old company had more than 4,900 employees, according to its Web site. That’s about 880 employees affected by the layoff, though some reports indicate a higher number. The layoffs were immediate.
The dramatic move was prompted by changing economic conditions, cost management, and growing too big too quickly, Brian Armstrong, Coinbase chief executive and cofounder, announced in a blog post.
The backdrop for all this is the steep decline in the value of Bitcoin. Trading at $22,113 mid-morning, Bitcoin is down 68% from its 52-week high of $68,990.90, according to data from CoinDesk, a crypto-tracking service.
Armstrong cited the potential for a recession that could lead to a “crypto winter,” an allusion to a prolonged period when crypto prices dropped and stayed low. “In past crypto winters, trading revenue (our largest revenue source) has declined significantly. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment,” Armstrong wrote.
Armstrong also said the company’s employee growth—it had 1,250 employees at the beginning of 2021—was too much to keep up with. “We saw the opportunities but we needed to massively scale our team to be positioned to compete in a broad array of bets. It’s challenging to grow at just the right pace given the scale of our growth (~200% y/y since the beginning of 2021). While we tried our best to get this just right, in this case it is now clear to me that we over-hired,” the post said.
Coinbase went public last year and saw its stock finish at $328.28 per share on opening day. Its stock was trading at $49.76 mid-morning Tuesday.
What impact this might have on merchants that work with Coinbase is unknown. San Francisco-based Coinbase provides custom checkout and invoicing services to merchants. In December, it began providing Bitcoin, Ethereum, Litecoin, and USD Coin acceptance to Nextech AR Solutions Corp., an augmented reality and related services provider. And in January, Mastercard Inc. said it was enabling its branded cards to be used for purchases on an upcoming NFT marketplace from Coinbase. NFTs, or non-fungible tokens, are digital goods.