Coinbase to lay off 18% of staff amid crypto meltdown

Fresh waves of accounts swept across the cryptocurrency industry on Tuesday, with exchange firm Coinbase Global Inc. saying it would cut nearly a fifth of its staff and crypto lender Celsius Network LLC hiring a firm lawyers to review restructuring options.

Coinbase, one of the growth companies signaling the crypto boom, said it was cutting its workforce by 1,100 employees, or about 18% of its staff, as the company had grown too quickly and a potential recession. “could lead to another crypto winter”. ”

In a letter to employees, chief executive Brian Armstrong said “our personnel costs are too high to effectively manage this uncertain market.”

“We appear to be entering a recession after an economic boom of more than 10 years,” Mr. Armstrong wrote. “A recession could lead to another crypto winter and could last for an extended period. Over the past few crypto winters, trading revenue (our primary source of income) has dropped significantly.

Meanwhile, Celsius, one of the biggest crypto lenders, has tapped lawyers from the law firm Akin Gump Strauss Hauer & Feld LLP to advise them on solutions to its growing financial woes, people familiar with said. folder. Celsius had told users on Sunday night that it was suspending all withdrawals, trades and transfers between accounts due to extreme market conditions, adding more turbulence to cryptocurrency prices. A spokeswoman for Akin Gump had no immediate comment. Celsius executives did not immediately respond to requests for comment.

The destruction of crypto markets has been broad and deep, with around $2 trillion of value having been wiped out across many cryptocurrencies since November, when bitcoin – the most common among them – hit an all-time high. of $67,802.30.

Investors have continued to offload assets considered risky, such as cryptocurrencies and tech stocks, as the Federal Reserve tries to rein in the highest US inflation in decades. The S&P 500 stock index entered a bear market this week as investors expected the Fed to raise interest rates further.

As of 5 p.m. ET Tuesday, bitcoin was trading at $21,991.89, down 5.4% for the day and 68% below its all-time high. Dogecoin, a cryptocurrency that started out as a joke but established itself enough to be mentioned by Elon Musk on “Saturday Night Live,” peaked at 67.4 cents in May 2021 and crashed 92% from.

Coinbase, the largest cryptocurrency exchange in the United States, has struggled to hang on to users this year as the digital asset frenzy cooled and markets were choppy. In May, Coinbase said it lost hundreds of millions of dollars in the first quarter as its trading fees fell sharply. Coinbase’s transaction user count has also declined, and the company said it expects transaction volumes and users to decline again in the second quarter.

Since the earnings report, things have gotten worse for cryptocurrency prices, Coinbase shares, and markets in general.

Coinbase’s IPO last year was seen as a watershed moment for the crypto industry, which began a decade earlier as a digital currency experiment. Its beginnings were hailed by some as similar to the IPOs of other industry-defining companies, such as Netscape in the 1990s. of headquarters, went public, the first trade of its stock was at $381, and the shares reached $429.54. On Wednesday, it closed at $51.58.

WSJ’s Dion Rabouin explains why Wall Street is now betting big on crypto and what that means for the new asset class and its future. Photo composition: Elizabeth Smelov

Last week, Mr. Armstrong tweeted criticism of a petition by Coinbase employees seeking to remove certain executives, excluding Mr. Armstrong, from the company because “the management team has recently taken decisions that are not in the best interest of the company, its employees and its shareholders.

In a June 10 Twitter thread that spanned 16 tweets, Mr. Armstrong said, “If you have no trust in the leadership or the CEO of a company, why are you working at this company? Quit and find a company you believe in!

Coinbase said it expects to have 5,000 employees after the layoffs and laid off employees will receive at least 14 weeks of severance pay.

Other crypto-focused companies recently announced layoffs as crypto prices plummeted. BlockFi, a crypto trading and lending platform, said on Monday it would cut its workforce by 20% as it said the “macroeconomic environment has changed dramatically.”

The CEO of Crypto.com, the company that recently put its name to the Los Angeles Lakers arena and ran a Super Bowl ad featuring LeBron James, said his company would make “targeted reductions ” of approximately 5% of its workforce, i.e. 260 jobs. Earlier in June, crypto exchange Gemini Trust Co. cut its staff by 10%, citing the effects of the market slowdown.

The layoffs come after a hiring boom as crypto rose in value. Hirings for crypto companies doubled from November to April, according to data collected by ManpowerGroup.

Write to Nathan Becker at nathan.becker@wsj.com, Soma Biswas at soma.biswas@wsj.com and Alexander Gladstone at alexander.gladstone@wsj.com

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