Coinbase announced on Tuesday that it would lay off 20% of its employees—950 people out of an estimated 4,700—in an effort to significantly reduce its operating expenses. It’s the company’s second large round of layoffs in less than a year. In June, Coinbase laid off 1,100 employees.
The company made the move to “weather the downtowns” in the crypto market over the next two financial quarters. In a blog post, Coinbase CEO and co-founder Brian Armstrong revealed that the company had been affected by the broader macroeconomic downturn in 2022 as well as by the fall nefarious competitors in crypto space. Though the dust is settling in cryptocurrency, Armstrong warned that there “could still be further contagion” and said the company would need to cut costs to get through the months ahead.
“Coinbase is well capitalized, and crypto isn’t going anywhere,” Armstrong wrote in a message that was shared with employees. “In fact, I believe recent events will ultimately end up benefiting Coinbase greatly (a large competitor failing, emerging regulatory clarity, etc.), and they validate our long term strategy. But it will take time for these changes to come to fruition and we need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge.”
Armstrong said that employees affected by the layoffs would be informed today, pointing out that their access to the company’s system had already been eliminated. He took responsibility for the decisions that got the company to the point and stated that the company had “too focused on growing headcount as a metric for success,” a sentiment shared by many in the tech industry in recent months.
As far as compensation packages go, the Coinbase CEO explained that employees in the U.S. would receive 14 weeks of base pay as well as two additional weeks per year at the company. Coinbase will also provide laid off employees with health insurance and visa support. Armstrong stated that the compensation packages would be similar for employees outside the U.S. in accordance with the employment laws in their country.
Coinbase’s cuts come just days after the crypto lender Genesis laid off 30% of its staff. According to the Wall Street Journal, Genesis is considering filing for bankruptcy. The crypto exchange Huobi also announced layoffs last week, stating it planned to cut 20% of its staff. In addition, FTX’s multi-billion-dollar collapse and its founder’s upcoming fraud trial continues to hang heavy over the crypto industry. The FTX hangover stands to only worsen as investigators untangle the former giant’s web of lies.
Despite the bleak situation, Armstrong struck a resilient tone in his message, expressing optimism about the future of Coinbase and crypto.
“Dark times also weed out bad companies, as we’re seeing right now. But those of us who believe in crypto will keep building great products and increasing economic freedom in the world,” he said.