Major crypto exchange Coinbase published a message from its CEO, Brian Armstrong. The company has decided to reduce its workforce by 18% to “ensure we stay healthy during this economic downturn”.
Related Reading | Lending Platform Celsius Freezes Withdrawals, Raising Liquidity Concerns
Last year, Coinbase became the first crypto exchange to debut in public markets under the ticker COIN. This event marked the beginning of a downtrend that will see the slow collapse of Bitcoin and the crypto market to its current levels.
As the company receives its revenue from crypto investors, the price of its stocks seems highly correlated with the performance of Bitcoin and other cryptocurrencies. This nascent asset class has been trending to the downside and taking Coinbase and others with it.
The downside price action across global markets is caused by the U.S. Federal Reserve (FED) and its attempts to bring down inflation which stands at a 40-year-old high. Over the past decade, Coinbase’s CEO said, the economy grew but now it trends in the opposite direction. Armstrong said:
We appear to be entering a recession after a 10+ year economic boom. 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.
The last time Bitcoin and the crypto market entered a bear phase was in early 2018. It took the nascent ascent over two years before it re-entered price discovery.
This is nothing new for Coinbase, its CEO claims the company has survived 4 crypto bear markets with a decline in revenue. However, they believe in “carefully managing our spending through every down period”.
In addition to these factors, Armstrong believes Coinbase has grown “too quickly” over the past year. During the high of the bull market, as more people entered the crypto space, the company expanded.
In hindsight, Armstrong believes, the company “over-hired” after a period of 200% year-over-year growth. The time has come to re-adjust.
Coinbase Choses Executives Over Its Employees?
The decision to cut down on its workforce has been notified to affected Coinbase employees. Over 1,000 people will be impacted by Armstrong’s decision.
These people will be given a 14-week severance package plus a bonus if they have been with the company for over 1 year. In addition, they will provide them with health insurance coverage for 4 months. The company is committed to helping its affected employees to secure new positions.
In other words, people will have around 3 months to find a new job in an economic situation that Armstrong himself classified as a “recession”. The executive concluded his message with the following statement:
I also expect you will all feel some level of fear, uncertainty and doubt about the future. Know that we made these hard decisions to ensure our future is bright.
The company is facing backlash for its hiring decisions. In addition to layoffs of 18% of its workforce, the company rolled back job offers that were “promised” to new hires.
Over 300 new hires, ready to join the exchange in the short-term, had to return to their old jobs or were left without options, a report from Vice claims. The media outlet talked to 17 of the people affected by the exchange’s decision.
Many described the situation as “reckless and negligent”. Others said: “This whole thing just kind of fucks me.”
During the 2021 bull market, Coinbase executives allegedly cashed out over $1.2 billion by dumping their stocks. Armstrong alone allegedly made over $290 million from share sales as the company proceeded to “over-hired”.
Related Reading | Coinbase Sponsorship Draws Criticism From WNBA Fans Amid Market Collapse
At the time of writing, COIN’s price trades at $51 with a 1% loss on the 4-hour chart.
Credit: Source link