Brian Armstrong, co-founder and CEO of crypto trading platform Coinbase, said in a blog post on Tuesday that in response to both macroeconomic factors and the fallout from the collapse of FTX, the company will lay off about 950 employees.
"In 2022, the crypto market trended downward along with the broader macroeconomy," Armstrong wrote in the post. "We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion. Coinbase is well-capitalized, and crypto isn't going anywhere. In fact, I believe recent events will ultimately end up benefiting Coinbase greatly (a large competitor failing, emerging regulatory clarity, etc.), and they validate our long-term strategy.
"But it will take time for these changes to come to fruition and we need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge," Armstrong wrote. "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."
Armstrong wrote that the reduction in staff was necessary to lower expenses in order "to increase our chances of doing well in every scenario." He said that several projects with a low probability of success would be shut down.
He thanked employees who will remain with the company for their "resilience," adding, "This latest downturn has caused plenty of fear and anxiety ... Our mission is more important than ever, and these changes will ensure we build an enduring company during this period."
He expressed optimism about the future of the company and of the crypto sector, writing, "Better days are ahead, and when they arrive, we’ll be ready."
According to Reuters, downsizing workers is part of a restructuring plan that will cost Coinbase as much as $163 million. The 950 employees being cut represented approximately 20% of the company's workforce.
"The entire industry is going through a crisis of confidence and trading volume remains very weak," Oppenheimer analyst Owen Lau said. "This job cut is a reflection of the current challenging environment."
High interest rates and recession fears resulted in more than $1 trillion being pulled from the crypto market, and FTX filed for bankruptcy in November, further rocking the industry. Coinbase cut more than 1,100 jobs in 2022, Reuters said.
According to Investopedia, Coinbase users can buy, sell and exchange more than 200 cryptocurrencies, including Bitcoin, Ethereum and Litecoin. Coinbase had more than 98 million users and more than $256 billion in assets as of June 2022.
The collapse of FTX also damaged the crypto sector.
“The challenge for the whole space when you think about contagion is that FTX and Alameda were extremely active investors in this space," Peter Smith, CEO of Blockchain.com, told CNBC.
Marieke Flament, CEO of the blockchain network Near, added that with FTX's bankruptcy, “the impact that this will have is that a lot of projects actually are not going to have the funds, and therefore the resources, for them to continue and develop.”
