Coinbase is laying off almost a fifth of its workforce amid a collapse in its stock and crypto prices.
The cryptocurrency exchange will cut 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has roughly 5,000 full-time workers, translating to a headcount reduction of around 1,100 people.
Shares of Coinbase were down about 2.5% before markets opened.
CEO Brian Armstrong pointed to a possible recession, and a need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “too quickly” during a bull market.
“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Armstrong said, adding that past crypto winters have resulted in a significant decline in trading activity. “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.”
Coinbase had initially said it was pausing hiring. Two weeks later, the crypto giant announced that it was extending the freeze for the “foreseeable future.” Earlier this year, Coinbase said it planned to add 2,000 jobs across product, engineering and design.
“Our employee costs are too high to effectively manage this uncertain market,” Armstrong said. “While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”
The news comes during a deep rout for Coinbase shares. The stock went public via a direct listing last April during a boom in crypto markets and investors clamoring for high-growth tech stocks. Coinbase’s stock is down 79% this year and 85% from the all-time high. Meanwhile, bitcoin has dropped to near $22,000 and has lost 53% of its value this year.
San Francisco-based Coinbase reported a slump in users in its last quarter and a 27% decline in revenue from a year ago. The company makes the majority of its top line from transaction fees, which are closely tied to trading activity.
President and chief operating officer Emilie Choi called it a “very difficult decision for Coinbase” but given the economic backdrop,” she said it “felt like the most prudent thing to do right now.”
Affected employees received a notification from HR. If so, the memo was sent to a personal email as Coinbase cut off access to the company systems. Armstrong called it the “only practical choice” given the number of employees with access to customer information, and a way to “ensure not even a single person made a rash decision that harmed the business or themselves.”
Coinbase employees will have access to a talent hub to find new jobs in the industry, including Coinbase Ventures’ portfolio companies. Choi said they would still be “doubling down” on areas like security and compliance and may be “reorienting” employees to near-term revenue drivers.
“If there are any cuts to new product areas, it’s going to be more around experimental venture areas that we’re still very bullish on, but that we don’t want to invest in in this part of the cycle,” Choi told CNBC in an interview at the company’s headquarters.
“We will continue to invest in incredible innovative areas of crypto that we think are emerging over the longer term, but we’re probably going to do those in a more measured way in this type of an environment.”
Coinbase joins dozens of other tech and crypto companies slamming the brakes on hiring. Crypto lender BlockFi said it was cutting 20% of its employees on Monday. Open-source tracker Layoffs.fyi estimates that more than 5,500 start-up and tech jobs have been cut in June alone.
Coinbase’s intention is “that this is a one time event,” Choi said adding that the company has $6 billion of cash on the balance sheet. The company has lived through multiple bear markets in crypto before, also known as “crypto winters.”
“We will power through any macro environment, any crypto winter, or anything that’s coming,” she said. “The reality though, is that we have to adjust when we feel that there’s a very dynamic economic environment in play.”
Tech companies have been fighting low morale and attrition as their stocks get slammed. Last week, a petition posted to a decentralized publishing platform called for the removal and a “vote of no confidence” regarding several Coinbase executives, including Choi.
Coinbase Brian Armstrong called attention to the since-deleted petition, and in a Tweet urged employees to quit if they don’t believe in the company.
“We will always encourage our employees to share feedback internally on how we operate as a company – and we have a number of mechanisms in place for them to do so. It’s very much unclear if this document came from within the company,” Choi said. “However, if it did, we’re disappointed that those behind it felt the need to breach the trust of the company and their coworkers by sharing this information in a way clearly designed to drive controversy rather than a meaningful dialogue.”
Coinbase has no plans to offer additional company equity grants, or cash compensation amid the price drop, Choi said. The company offers annual grants, partially so employees could “mitigate the swings” and volatility in crypto. For employees and investors, the COO likened it to Amazon or Tesla: a long-term investment with volatility in the meantime.
“We think that anyone who makes an investment, whether they’re an employee or investor, will have a handsome return over the longer term,” Choi said. “Coinbase is a long-term play — we have very deep conviction in the long-term value of the stock.”