Coinbase is once again slashing its workforce in response to the ongoing downturn in the cryptocurrency industry.
The publicly traded cryptocurrency exchange announced that it is planning to reduce its headcount by around 950 employees as part of the company's restructuring effort that it expects to be completed by the end of the second quarter of this year. (Related: Crypto exchange platform Coinbase lost around 85% of its value in one year.)
This mass layoff amounts to slashing 20 percent of its approximately 4,700 employees. In an interview with CNBC, CEO Brian Armstrong noted that the company should have done more of its restructuring efforts earlier.
"With perfect hindsight, looking back, we should have done more. The best you can do is react quickly once information becomes available, and that's what we're doing in this case," he said.
Armstrong added that, after looking at various stress tests for Coinbase's annual revenue, "it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario" and there was no way to do so without cutting jobs.
The company began shedding jobs in June 2022, when signs that the cryptocurrency industry was experiencing a bearish market were beginning to take hold. CEO Brian Armstrong claimed at the time that the company had "grown too quickly" during the industry's bull market, expanding to more than 5,000 employees from just 1,250 at the beginning of 2021.
Coinbase started its restructuring efforts by slashing 1,100 jobs, equivalent to about 18 percent of the workforce at the time. Another 60 employees were laid off in November as the crypto winter grew even colder, thanks to the collapse of the scandal-ridden FTX creating a contagion effect that made most other crypto companies experience dips.
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"Every company in Silicon Valley felt like we were just focused on growth, growth, growth, and people were almost using their headcount number as a symbol of how much progress they were making," said Armstrong. "The focus now is on operational efficiency – it's a healthy thing for the ecosystem and the industry to focus more on those things."
Coinbase said it would email the employees who will be let go on their personal accounts and revoke their access to company systems. Armstrong acknowledged that this move "feels sudden and harsh" but "it's the only prudent choice given our responsibility to protect customer information."
Layoffs to result in higher savings for Coinbase
Coinbase noted that this mass layoff is expected to result in new expenses of between $149 million to $163 million for the first quarter. The company's operating expenses are also expected to go down by 25 percent for the quarter ending in March due to the layoffs and other restructuring measures.
Wall Street analysts have already reacted positively to Coinbase's job cuts announcement. Analysts from Barclay's wrote: "We are encouraged by this morning's news, as it shows the company is taking financial discipline seriously in a very challenging crypto/macro environment."
But Barclays and other analysts also noted that Coinbase may also be preparing for a tough year ahead.
"The entire industry is going through a crisis of confidence and trading volume remains very weak," noted Owen Lau, an analyst for Oppenheimer. "This job cut is a reflection of the current challenging environment."
Armstrong himself noted that despite the industry's domino effect of bankruptcies and the drop in trading volume, he believes the industry is not going away. He also pointed out that the demise of FTX, a rival cryptocurrency exchange platform, will ultimately benefit Coinbase.
Regulatory clarity may also emerge from the FTX debacle, which Armstrong said will only validate the company's decision of going public.
"If you look at the internet era, the best companies got even stronger by having rigorous cost management," he said. "That's what's going to happen here."
For more news about the crypto industry, visit CryptoCult.news.
Watch this episode of the "Health Ranger Report" as Mike Adams, the Health Ranger, talks to John Perez, the Crypto Nostradamus, about what comes next following the crypto crash.
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