Cryptocurrency exchange to cut nearly 1,000 additional jobs and record significant charges.
The horizon is uncertain for Coinbase.
The cryptocurrency exchange is still unable to get out of the bad patch that the cryptocurrency sector has been going through for a year.
The cryptocurrency market has lost nearly $2.1 trillion compared to its all-time high of $3 trillion reached in November 2021. The market is currently worth some $886 billion according to data firm CoinGecko.
Bitcoin (BTC), the most popular digital asset, has lost 75% of its value compared to its all-time high of $69,044.77 reached on November 10, 2021. BTC prices are currently trading around $17,233.76. The prices of the king of cryptocurrencies have relatively stabilized since the year 2023.
The biggest problem in the young blockchain-powered financial services industry is mistrust. The mistrust of the general public caused by a succession of scandals after the crypto craze of 2021.
Last May, sister tokens Luna and UST collapsed overnight causing billions of dollars in losses to retail investors and institutional investors. This disaster caused a credit crunch which forced the hedge fund Three Arrows Capital, or 3AC, to go into liquidation. Imminent crypto lenders like Voyager Digital and Celsius Network have filed for Chapter 11 bankruptcy.
This game of dominoes revealed the incestuous relationships and the interdependence between the actors of the crypto space. Customers of these platforms, who lost their savings, were often unaware that their money was often loaned to other firms.
In November, Sam Bankman-Fried’s crypto empire collapsed. This disaster was a real bombshell as the former trader was the institutional face of crypto. He had rescued many firms during the credit crunch and his FTX cryptocurrency exchange was valued at $32 billion last February.
The FTX rout has yet to reveal all of its casualties. The biggest, however, remains the confidence in the crypto industry which has completely collapsed. Retail investors have fled the sector, while institutional investors are much more cautious, especially since a recession is expected this year.
This is confirmed by Coinbase. the platform has just announced the loss of nearly a thousand additional jobs. Coinbase (COIN) – Get Free Report will eliminate 20% of its current workforce, or approximately 950 jobs.
“We need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge,” CEO Brian Armstrong told employees in a blog post on January 10. “Therefore, I’ve made the difficult decision to reduce our operating expense by about 25% Q/Q, which includes letting go of about 950 people.”
“This is the first time we’ve seen a crypto cycle coincide with a broader economic downturn,” Armstrong continued. “As we examined our 2023 scenarios, it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario. While it is always painful to part ways with our fellow colleagues, there was no way to reduce our expenses significantly enough, without considering changes to headcount.”
Coinbase will therefore shut down several projects.
All of these actions will result in a charge of between $149 billion and $163 billion, the company said in a regulatory filing. These charges are mainly severance pay and other termination benefits and will be included in the results of the first quarter of 2023.
The crypto firm also said it expects adjusted EBITDA losses for the full year to be within a prior $500 million “guardrail” set last year.
The new job cuts are the second wave of job eliminations by Coinbase in less than a year. Last June, the company cut 18% of jobs, or 1,000 people who were laid off.
These layoffs mark the end of an era of abundance and insolent growth for the crypto industry that had benefited Coinbase. The platform had its IPO in April 2021. The shares had thus soared to $341.
But they have fallen sharply last year. Currently the stock price is around $38, which means a the drop is 89%.