Coinbase to layoff 1,100 employees (18% of workforce) as tech companies prepare for recession and ‘crypto winter’

Crypto exchange Coinbase said Tuesday it’s laying 1,100 employees as part of measures to cut costs amid the financial market meltdown. According to the announcement, the cut represents 18% of its total workforce.

Coinbase has been under a lot of pressure in recent months. Just last month, Coinbase warns its users could lose their crypto holdings if the company goes bankrupt. Coinbase warned its customers their crypto holdings could be viewed as general unsecured assets during the bankruptcy proceedings.

In a blog post on Tuesday, Coinbase CEO Brian Armstrong said, “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.”

In his email to Coinbase employees, Armstrong also pointed to a possible recession, and the need to manage the company’s burn rate and increase efficiency. He added that Coinbase grew “too quickly” during the 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 in the email, 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.”

Without further elaboration on which departments would be impacted, Armstrong said employees would receive an email “in the next hour” from HR informing them if they had been affected by the layoff. A few weeks ago, Coinbase said it would extend a hiring freeze and rescind a number of accepted offers in order to deal with current macroeconomic conditions.

The company also disclosed in a filing on Tuesday that it expects to incur about $40 million to $45 million in total restructuring expenses, substantially related to employee severance and other termination benefits.

“On June 14, 2022, Coinbase Global, Inc. (the “Company”) announced a restructuring plan (the “Plan”) to manage its operating expenses in response to current market conditions and ongoing business prioritization efforts. The Plan involves a reduction of the Company’s workforce by approximately 1,100 employees, representing approximately 18% of the Company’s global workforce as of June 10, 2022, following which the Company expects to have approximately 5,000 total employees as of the end of its current fiscal quarter on June 30, 2022. The Company expects execution of the Plan to be substantially complete in the second quarter of 2022.”

The extreme volatility caused by macro events and geopolitical uncertainties such as rising inflation and the impact of the Ukraine war has rippled through the entire crypto market causing bitcoin to tumble to its two-year low. At some point yesterday, bitcoin fell by much as 18% before bouncing back to a little over $22,000.

Earlier this month, Coinbase said it would extend a hiring freeze and rescind a number of accepted offers in order to deal with current macroeconomic conditions.

Founded in 2012 by Brian Armstrong and Fred Ehrsam, the San Francisco, California-based Coinbase is a digital currency wallet and platform where merchants and consumers can transact with new digital currencies like bitcoin, ethereum, and litecoin. Since its inception nine years ago, Coinbase has raised a total of $847.3 million in funding over 14 rounds. Its latest funding was raised on December 21, 2018, from a secondary market round.