The biggest cryptocurrency exchange has fired nearly a fifth of its staff via a harsh email from the CEO, in the latest grim sign for the market.
Coinbase has announced it will be laying off 18% of its staff, warning of an impending recession and “crypto winter” as the market continues a major crash that has wiped billions of dollars off bitcoin’s value and… other digital currencies.
The biggest US-based exchange blamed too-rapid expansion and tough economic conditions for the need to cut around 1,100 jobs, with co-founder and chief executive Brian Armstrong announcing the ‘difficult decision’ in an email to staff. tuesday.
“We appear to be entering a recession after an economic boom of more than 10 years,” he wrote.
“A recession could lead to another crypto winter and could last for an extended period. Over the past crypto winters, trading revenue (our primary source of income) has declined significantly. Although it is difficult to predict the economy or the markets, we always plan for the worst so that we can operate the business in any environment.
It came as bitcoin fell below US$21,000 (A$30,445) – approaching levels last seen in December 2020 and nearly 70% below its November 2021 all-time high of US$67,802 (A$98,299) – while the broader cryptocurrency market fell below US$1 trillion (A$1.45 trillion) from US$3 trillion (4 .35 trillion Australian dollars) at its peak, according to at Coinmarketcap.
Crypto prices have been falling since November, but the correction turned into a rout last month with the collapse of the terra “stablecoin”, which was supposed to be pegged to the US dollar, and its sister token luna.
The sell-off panic resumed this week when one of the biggest UK-based crypto lending platforms Celsius Networktold users on Sunday evening that it was suspending all withdrawals, trades and transfers between accounts due to “extreme market conditions”.
As bitcoin’s price plummeted, Binance, the world’s largest crypto exchange by trading volume, added fuel to the fire on Monday by announcing a temporary freeze on withdrawals “due to a struck transaction”.
The sharp sell-off in the cryptocurrency market comes as central banks begin to aggressively raise interest rates to combat skyrocketing inflationforcing investors to withdraw from riskier assets and causing stock markets to fall.
Coinbase had already warned in mid-May that its number of active users was declining. The group recorded a net loss of $430 million (A$623 million) in the first quarter of 2022.
Mr. Armstrong told staff that “managing our costs is critical in bear markets” and noted that the company had “survived four major crypto winters”, but conceded this time “we grew too quickly”.
Coinbase has grown from 1,250 employees at the start of 2021 to around 6,200 currently.
“At the time, we were in the early innings of the bull run and adoption of crypto products was exploding,” he said.
“There were new crypto-enabled use cases that were getting traction practically every week. We saw the opportunities, but we needed to massively expand our team to position ourselves to compete in a wide range of bets. Although we did our best to make it perfect, in this case it is now clear to me that we have over-hired. »
Mr Armstrong said every employee would receive an email from HR “within the next hour” letting them know if they were made redundant.
“If you are affected, you will receive this notification in your personal email, as we have made the decision to cut off access to Coinbase systems for affected employees,” he wrote.
“I realize that the removal of access will be sudden and unexpected, and this is not the experience I wanted for you. Given the number of employees who have access to sensitive customer information, this was unfortunately the only practical choice, to ensure that no one made a rash decision that harmed the company or themselves.
He added that affected employees will receive a minimum of 14 weeks of severance pay plus two weeks for each year of employment.
They will also receive four months of health insurance coverage in the United States and four months of mental health support around the world.
Ironically, the massive layoffs come days after Mr. Armstrong publicly urged his own employees to quit after circulating a petition calling for the removal of senior executives to “revive” Coinbase.
From employee complaints “were aggressively hiring for thousands of positions, despite it being an unsustainable plan and contrary to crypto industry wisdom.”
“This is truly stupid on so many levels,” Mr. Armstrong wrote on Twitter in response to the petition. “If you have no faith in the leaders or the CEO of a company, why are you working in this company? Quit and find a company you believe in!
In announcing the layoffs, Coinbase did not change its guidance for the year but warned that its results would likely be at the low end of the guidance range.
The NASDAQ-listed company, currently valued at $11.45 billion ($16.6 billion), has seen its share price plummet 80% since its debut in April last year at $250 ($362 dollars).
Coinbase shares fell less than 1% to close at US$51.58 (A$74.78) on Tuesday.
– with AFP
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