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Crypto exchange Coinbase (COIN) is letting go of about 1,000 employees as part of a critical strategy to weather down the crypto winter. According to a report from Reuters, this is the company’s third round of layoffs as macroeconomic conditions and persistent downside pressure the nascent sector.
Coinbase’s CEO, Brian Armstrong, explained the restructuring strategy and the motivations behind the decision to cut down on his staff. The crypto exchange was founded in 2012, surviving multiple bear markets, but this is the first time a crypto winter coincides with a macroeconomic downturn.
Coinbase Worry About More Crypto Contagion
Furthermore, Armstrong believes that the crypto exchange will benefit from recent events. However, there is still a short and medium-term risk.
The company decided to reduce its headcount after planning for 2023. The most significant factor influencing this decision was the collapse of the crypto exchange FTX. This company filed for bankruptcy in late 2022, negatively impacting many projects.
Coinbase expects that other companies and projects will be affected by the collapse of FTX in the coming months. The recent layoffs represent a 25% reduction in the company’s operating expenses. Armstrong said:
As part of a headcount reduction like this, we will be shutting down several projects where we have a lower probability of success. Affected teams will receive communication on this today. Our other projects will continue to operate as normal, just with fewer people on the team.
As Reuters noted, the projects affected by this decision were kept secret. Armstrong claims that the company will provide involved teams with a “comprehensive” package to “support you through this transition.”
This support includes a 14-week base pay, health insurance, and more for those employees living in the United States. As in past layoff rounds, Coinbase claims that it will help its former employees with the connections to find their next job.
Too Big, Too Fast
In late 2020, the price of Bitcoin skyrocketed beyond $20,000. The cryptocurrency recorded a massive rally from a low of $3,000, in March 2020, to an all-time high of $69,000 in November 2021.
For crypto companies such as Coinbase, the bull run was an opportunity. These companies expanded and grew, perhaps too quickly, according to Armstrong. The company’s CEO added the following regarding this expansion and the future of the company:
As Coinbase grew so quickly in 2021, we all felt the coordination headwind that caused us to move more slowly (…). Despite everything we’ve been through as a company and an industry, I’m still optimistic about our future and the future of crypto. Progress doesn’t always happen in a straight line.
As of this writing, COIN’s price is trading at $37. The company’s shares lost over 5% of their value after announcing its newest layoff round.