Coinbase Is Starting Another Round of Layoffs in an Attempt to Save Cash Amid the Crypto Market Crash
Following an 18% drop in the workforce in June of last year, Coinbase is rumored (1) to be contemplating a second large round of staff reductions for the coming months. A prolonged decline in the value of crypto currencies has coincided with the most recent round of layoffs at Coinbase, which were carried out to maintain liquidity.
The big exchange plans to eliminate 950 positions, which is a 20% reduction. According to Brian Armstrong, who serves as a chief executive officer:
When we reflect on it with a clear vision, we realize that we could have done more. The best thing you can do once data is available is to react promptly, and that's what we're doing in this case.
Following the layoffs in June, Coinbase had around 4,700 employees as the previous fiscal year's third and final month, September came to a close. The prominent crypto currency exchange in the United States says that it expanded too rapidly during the bull market.
Additionally, Coinbase anticipated that the most recent round of layoffs would result in new costs of up to $163 million in the first quarter. On the other hand, the exchange's operating expenses will be reduced by 25% during the same period due to the reduction and other reorganization measures.
In addition, Coinbase forecasts that its adjusted EBITDA loss for 2023 would be within the previously-established safety net of $500 million, which was established for the prior year.
FTX Collapse as a Catalyst in for the Layoffs
Armstrong emphasizes that for Coinbase to maximize its odds of prospering in any "stress test scenario," the company must reduce its workforce again. In addition, he brought out the recent pressure that "unscrupulous actors" like Sam Bankman-Fried and FTX have been exerting on the crypto currency market.
According to Armstrong, "the collapse of FTX and the subsequent spread has produced a black eye for the industry." In addition to that, he gave the impression that things were only going to get worse. The estimates provided by the CEO of Coinbase are as follows:
It's possible that we haven't seen the last of it yet; there will be a heightened level of scrutiny placed on the many businesses operating in this sector to ensure that they are adhering to the regulations. In the long run, that will be beneficial. However, there is still much market concern in the short term."
Coinbase has also made public its intention to terminate several projects that have a reduced probability of becoming successful.
Following the publication of the downsizing report on Tuesday, shares of Coinbase finished the day 12 percent higher. After making unnecessary hiring during the Covid epidemic, the crypto currency startup has become the most recent tech platform to reduce the amount of its workforce.
Investors are fleeing riskier assets amid a widespread economic slowdown, which has resulted in a severe decline in the value of technology equities, which have also taken a beating. For example, the top crypto currency, Bitcoin (BTC), has experienced a fall of 58% over the past year, while Coinbase stock has experienced a drawdown of 83%.
It's a Matter of Survival
Amazon declared on Wednesday that it would cut 18,000 positions, which is more than its initial prediction for 2022. The statement was made when one of Amazon's workers intentionally leaked information to the media, which pushed the internet giant to disclose its plans to reduce headcount.
As a consequence, Amazon CEO Andy Jassy hinted that the corporation may not have provided adequate warning to individuals directly affected by the decision.
Additionally, last week, Salesforce announced that it would cut its workforce by 10%. As a further consequence of Elon Musk's acquisition of Twitter, the company laid off fifty percent of its workforce.