After extending a hiring pause and rescinding some accepted job offers, Coinbase says it will lay off approximately 1,100 employees, or 18% of its global workforce, as the company braces for a potential recession and "crypto winter."
"We appear to be entering a recession after a 10+ year economic boom," Coinbase CEO Brian Armstrong wrote in a blog post on Tuesday. "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."
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Gemini co-founders Cameron and Tyler Winklevoss have described a crypto winter as a "contraction phase settling into a period of stasis." The twins recently laid off 10% of their staff, citing "turbulent market conditions that are likely to persist for some time."
On Monday, the price of bitcoin fell below the $24,000 per coin level. As of the time of publication, the world's largest cryptocurrency is trading around the $22,000 per coin mark after hitting a 52-week low of $20,834.50 per coin overnight.
Coinbase, which has survived four major crypto winters, said that the layoffs would help the company manage its costs and increase efficiency during down markets.
Armstrong said that Coinbase's employee costs are "too high to effectively manage this uncertain market" and that the company has exceeded the limit of how many new employees it can integrate while growing its productivity.
"While we tried our best to get this just right, in this case it is now clear to me that we over-hired," he said.
Coinbase, which had 1,250 employees at the beginning of 2021, has seen its headcount grow 200% year over year. It expects to have approximately 5,000 total employees as of the end of its current fiscal quarter on June 30, 2022.
In connection with its restructuring, Coinbase expects to incur approximately $40 million to $45 million in total expenses in the second quarter of 2022, all of which are future cash-based expenditures and substantially all of which are related to employee severance and other termination benefits.
The estimate does not include any non-cash charges associated with stock-based compensation. Coinbase, which is not updating its full year guidance, said it expects to recognize "an immaterial reduction of stock-based compensation."
Coinbase, which has cut affected employees' access to its systems, will send an invitation to their personal emails to have a direct conversation with an HR representative and their senior leader.
"I realize that removal of access will feel sudden and unexpected, and this is not the experience I wanted for you," Armstrong. said. "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."
Departing employees will receive a minimum of 14 weeks of severance plus an additional two weeks for every year of employment beyond their first year; four months of COBRA health insurance in the U.S.; four months of mental health support globally; and access to a talent hub where Coinbase will work to connect them with open positions at other firms, including portfolio companies from Coinbase Ventures and other top crypto venture capital funds.
"Coinbase employees are among the most talented in the world, and I am certain that the skills you all possess will continue to be sought after by companies around the world," Armstrong added. "I realize it may take longer in this environment to find new employment, and so my hope is that this financial and non-financial assistance helps make this unexpected transition for you as seamless as possible."
Coinbase will share additional details with its remaining employees on the company's future over the coming days.
The layoffs come after a group of employees circulated a petition in an attempt to rally support to hold votes of no confidence against Coinbase Chief Operating Officer Emilie Choi, Chief Product Officer Surojit Chatterjee and Chief People Officer L.J. Brock.
Armstrong called the petition "dumb on multiple levels" in a lengthy Twitter thread and said unhappy employees should "quit and find a company to work at that you believe in."
"Posting this publicly is also deeply unethical because it harms your fellow co-workers, along with shareholders and customers," he added. "It's also dumb because if you get caught you will be fired, and it's just not an effective way to get what you claim to want."
Coinbase shares have fallen over 75% year to date.