The Bear Market Strikes
According to a blog post from Armstrong on Tuesday, the CEO explained that the recent macroeconomic downturn has forced his company to consider cutting its costs. “We appear to be entering a recession after a 10+ year economic boom,” he predicted.
Earlier this month, data from the Atlanta Federal Reserve’s GDP tracker showed that the U.S. may be on the brink of recession – defined as two consecutive quarters of negative GDP growth. Meanwhile, the market is bracing for further impact from incoming interest rate hikes from the Federal Reserve, which may come faster than expected in response to red-hot inflation.
These pressures have spurred investors to abandon their positions in perceived “risk assets”, such as tech stocks and cryptocurrency. That’s bad news for crypto-centric companies like Coinbase, which tend to perform in tandem with the digital asset market. At present, the company’s stock trades at just $49.22 – an all-time low.
Bitcoin has now descended to lows unseen since December 2020. Given the circumstances, the CEO has been forced to grapple with the fact that his company overhired during last year’s bull market. Going by Armstrong’s numbers, the exchange tripled its headcount from 1250 to about 3750 across 2021, and over 4X in the past 18 months.
After analyzing the situation, executives have made the decision to prioritize managing expenses and increasing efficiency. Cutting a sizeable number of employees will be part of that effort, many of whom the company has no “productive” use case for right now.
“Adding new employees has made us less efficient, not more,” said the CEO. “We have seen ourselves slow down considerably due to coordination headwinds, and difficulty fully integrating new team members.”
Coinbase’s recent hiring cuts have already left many prospective employees adrift, who had their previous job offers rescinded in last-minute notices.
The Mass Crypto Layoff
Coinbase is far from unique in its need to cut labor costs. BlockFi CEO Zac Prince announced yesterday that the lending platform would lay off 20% of its 850 employees, also citing macroeconomic conditions.
Additionally, Crypto.com, Robinhood, and Gemini have revealed downsizing plans in recent months of roughly 5%, 9%, and 10% respectively.
The only crypto company that appears to be inviting more workers at this time is Binance. CEO Changpeng Zhao claims the exchange still has a “war chest” available to fund development during the crypto winter, after saving money during the bull market.