The cryptocurrency sector continues to suffer from the effects of the crypto winter, a period of time in which the price of digital assets (cryptocurrencies and non-fungible tokens) collapses. The exchange platforms, also known as exchanges, are directly witnessing this phenomenon, which does not spare even the best positioned players in this industry.
Coinbase is one of the big losers of this situation. The second largest exchange in the world, behind Binance, has just announced via a blog post that it will lay off 950 employees, which translates to a 20% cut in its workforce. In addition, it will cancel several projects that it had in progress that it believes “would have had a lower probability of success.”
Armstrong v. Bankman-Fried
Coinbase CEO Brian Armstrong has justified his latest move by putting pressure on the crypto sector over the downtrend experienced during 2022. The businessman has also referred to “the consequences of unscrupulous actors”, possibly referring to Sam Bankman-Fried and the bankruptcy of FTX, an event that generated a domino effect in the sector.
Armstrong, however, points out that the decision to cut staff has not been taken lightly. The company made several projections to do well in all scenarios and “weather crypto market downturns.” Consequently, management came to the conclusion that this would not be possible without laying off employees, a measure that will translate into a 25% reduction in its operating expenses.
Of course, it should be noted that this is not the first time that Coinbase has promoted this type of measure. The exchange began a restructuring process in the middle of last year after registering a crashing fall of more than 80% in the price of its shares. The strategy at the time was to lay off 18% of employees to better manage their expenses in the middle of the crypto winter.
The exchange began a restructuring process in the middle of last year.
The economic dimensions of Coinbase at the moment are not ideal. A look at company performance on Yahoo! Finance reveals that, in the last year, its shares had a peak of $237.23 on January 11, 2022. However, at the time of writing, they are trading at $41.27. In other words, these values indicate that they have lost -82.6% of their value.
But two years ago the picture was very different. The cryptocurrency market enjoyed prices that they shot from the end of 2020 to the beginning of 2021. In April of this last year, Coinbase earned in a quarter the equivalent of everything it had earned the previous year. And things hadn’t gone bad before, the company, for example, had spent a fortune hiring a bunker under a mountain to guard bitcoins.
After that good time, things began to get complicated. The cryptocurrency bull run began to come to an end in November 2021… and the decline began. According to data from CoinGecko, the price of Bitcoin has fallen by 58.5% in the last year. In the same period, the falls have been precipitous for other currencies. Ethereum (ETH), registering 57.8% down, and BNB -37.2% thus far.
It should be noted that the cryptocurrency sector is not the only one in difficult times. The macroeconomic changes, coupled with growing fears of a global recession, have hit the tech industry in general hard. Amazon, which was originally going to lay off 10,000 employees, ended up laying off 18,000. Meta cut 11,000 workers from its workforce and Twitter restructured, leaving more than 50% of its workforce out of business.
Images: Coinbase | DilokaStudio
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