The largest cryptocurrency exchange has sacked nearly one-fifth of its staff via a brutal email from the CEO, in the latest grim sign for the market.
Coinbase has announced it will sack 18 per cent of its staff, warning of a looming recession and “crypto winter” as the market continues a major crash that’s wiped trillions of dollars off the value of bitcoin and other digital currencies.
The largest US-based exchange blamed overly rapid expansion and tight economic conditions for the need to cut around 1100 positions, with co-founder and chief executive Brian Armstrong announcing the “difficult decision” in an email to staff on Tuesday.
“We appear to be entering a recession after a 10+ year economic boom,” he wrote.
“A recession could lead to another crypto winter, and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly. 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.”
It came as bitcoin fell below $US21,000 ($A30,445) – nearing levels last seen in December 2020 and nearly 70 per cent down from its all-time high in November 2021 of $US67,802 ($A98,299) – while the broader cryptocurrency market fell below $US1 trillion ($A1.45 trillion), down from $US3 trillion ($A4.35 trillion) at its peak, according to 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 selling panic resumed again this week when one of the largest crypto lending platforms, UK-based Celsius Network, told users on Sunday night it was suspending all withdrawals, swaps and transfers between accounts due to “extreme market conditions”.
As the price of bitcoin crashed, Binance, the world’s largest crypto exchange by trading volume, added fuel to the fire on Monday when it announced a temporary freeze on withdrawals “due to a struck transaction”.
The brutal sell-off in the cryptocurrency market comes as central banks begin aggressively raising interest rates to combat skyrocketing inflation, causing investors to pull out of riskier assets and sending stock markets tumbling.
Coinbase had already warned in mid-May that its number of active users was falling. The group posted a net loss of $US430 million ($A623 million) in the first quarter of 2022.
Mr Armstrong told staff “managing our costs is critical in down markets” and noted the company had “survived through four major crypto winters”, but conceded this time “we grew too quickly”.
Coinbase went from 1250 employees at the start of 2021 to about 6200 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 use cases enabled by crypto getting traction practically every week. We saw the opportunities but we needed to massively scale our team to be positioned to compete in a broad array of bets. While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”
Mr Armstrong said every employee would receive an email from HR “in the next hour” informing them whether they were being let go.
“If you are affected, you will receive this notification in your personal email, because we made the decision to cut access to Coinbase systems for affected employees,” he wrote.
“I realize that removal of access will feel 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, it was unfortunately the only practical choice, to ensure not even a single person made a rash decision that harmed the business or themselves.”
He added that affected employees will receive a minimum of 14 weeks severance plus two weeks for every year of employment.
They will also receive four months of health insurance cover in the US and four months of mental health support globally.
Ironically, the mass sackings come days after Mr Armstrong publicly urged his own employees to quit after they circulated a petition calling for senior executives to be removed to “revive” Coinbase.
Among the employees’ complaints were “aggressively hiring for thousands of roles, despite the fact that it is an unsustainable plan and is contrary to the wisdom of the crypto industry”.
“This is really dumb on multiple levels,” Mr Armstrong wrote on Twitter in response to the petition. “If you have no confidence in the execs or CEO of a company then why are you working at that company? Quit and find a company to work at that you believe in!”
In announcing the lay-offs, Coinbase did not change its forecasts for the year but warned that its results would probably be at the bottom of the range of predictions.
The NASDAQ-listed company, currently valued at $US11.45 billion ($A16.6 billion), has seen its share price plunge by 80 per cent since its debut in April last year at $US250 ($A362).
Coinbase shares fell less than 1 per cent to close at $US51.58 ($A74.78) on Tuesday.
– with AFP