Coinbase, a crypto exchange, has announced it would be laying off 20% of its workers in order to save resources amid the current bear market in the sector.
According to CNBC, a blog post issued by Coinbase on Tuesday morning, Jan. 10, revealed their intention to lay off 950 employees.
Coinbase's Next Move
The crypto trading Coinbase had over 4,700 workers as of the end of September 2022. It had previously slashed 18% of its staff in June, citing a need to control expenses and expanding "too quickly" during the bull market.
CEO Brian Armstrong admitted to CNBC over the phone that "with perfect hindsight, looking back, we could have done more." As the situation currently stands, the best thing to do is to respond whenever information becomes available, and that is what they are doing, he said.
Coinbase estimates that this change would cost an additional $149 million to $163 million for the year's first three months.
A recent regulatory filing reveals that layoffs and other cost-cutting initiatives would reduce Coinbase's operational expenditures by 25% in the quarter ending in March. Additionally, the cryptocurrency firm anticipates full-year adjusted EBITDA losses to fall below the $500 million "guardrail" established last year.
In light of the results of the revenue stress tests conducted by Armstrong and his team, he said it became evident that they would need to lower expenditures to maximize their odds of performing well in every possibility. He added that there was no way to do so without decreasing head numbers.
Many projects with a "lower probability of success" will also be terminated.
Damage from FTX Collapse
One of the prominent participants in the cryptocurrency sector, FTX, went bankrupt in November 2022. This sent shockwaves across the market.
With FTX and its founder, Sam Bankman-Fried, as examples of "unscrupulous actors" in the business, Armstrong noted the repercussions and growing pressure on the sector.
According to him, the industry has received a bad eye due to the FTX collapse and its subsequent effect.
Armstrong predicted that enterprises operating in the sector would be subject to greater scrutiny to ensure compliance with the law. "Long term, that's a good thing. But short term, there's still a lot of market fear."
Continuous Waves of Layoffs
After embarking on a recruiting spree during the Covid outbreak, Coinbase has joined the ranks of other tech businesses that have begun layoffs.
In the last week, both Amazon and Salesforce announced layoffs: Amazon by 18,000, or more than double its original forecast from last year, and Salesforce by more than 7,000, or 10%.
After becoming CEO of Twitter last year, Elon Musk eliminated over half of the company's staff, and the rounds of layoffs seem not yet finished. Meta also eliminated around 11,000 positions (about 13%).
Genesis, Gemini, and Kraken are just some crypto trading companies that have laid off employees.
