Coinbase is once again seeing market instability in January of 2023. Last year, Coinbase laid off a staggering volume of employees, in a bid to cool financial spending amid the cratering of share value within the tech sector and cryptocurrency marketplace. It seems that these moves weren’t enough to shore up Coinbase’s position, and a further 20% of the company’s employees will have to look elsewhere for work (via CNBC).
Gizmodo reports that Twitter, Meta, Robinhood, SoundCloud, Microsoft, and a plethora of other tech firms are laying off employees by the hundreds or even thousands. The market downturn has been prolonged and painful for investors and corporate types alike. With the continuing turmoil of the energy sector, financial recession across multiple national economies, and a war continuing in Ukraine, not to mention the continued strain felt as a result of the pandemic, cryptocurrency is seeing itself flattened as well.
The move falls in line with many other firms that are looking to remain whole through this fiscal minefield, but it still comes as a shock after such astronomical growth within the tech sector on the whole — and within the cryptocurrency marketplace and Coinbase itself specifically.
These layoffs follow a previous 18% reduction in June 2022
Perhaps the most shocking thing to note about these layoffs at Coinbase is the timing, in which it follows a previous round of substantial job cuts less than a year prior. In June 2022, Coinbase gutted its staff, laying off 18% of the company’s total workforce. At the time, CNBC reported that the company was angling to position itself for strength as the crypto bull market came to a close. Cutting jobs was, in Coinbase’s estimation, the most effective way to slash operating costs as the marketplace headed toward a financial cliff. Still, concurrent layoffs aren’t going to inspire confidence among investors in the stock market’s sole cryptocurrency titan.
According to CNBC, this latest move is geared toward the same kind of fiscal stabilization that Coinbase was reaching for with its first round of layoffs. Coinbase CEO Brian Armstrong indicated in an interview that this additional cost cutting measure perhaps should have been lumped in with the previous cuts, rather than coming as a second wave of firings, noting “the best you can do is react quickly once information becomes available.”
Coinbase suggests that the FTX fallout is a major factor in this shrinkage
The damage caused by FTX’s bankruptcy and the arrest of its founder Sam Bankman-Fried have certainly played a role in this dramatic shift. The cryptocurrency market on the whole has been devastated over the last year, and further reduced by what has been seen as a major erosion of public trust in the industry. Bitcoin, a bellwether of sorts for the marketplace as a whole, has lost more than half of its value from January 2022 (down to about $17,000 per Bitcoin as of January 10, 2023, according to CoinDesk).
CNBC notes that Coinbase expects to see increased regulatory scrutiny and the potential for more collapses within the industry as a result of the FTX debacle. This will surely increase the cost of doing business for those within the marketplace, placing additional pressure on the publicly traded company’s future operational efficiency.
Coinbase’s CEO, Brian Armstrong told CNBC: “Long term [greater oversight is] a good thing. But short term, there’s still a lot of market fear.” Combined with the fear of a “Cryptowinter” that experts were warning of at the end of 2022, Coinbase’s stock price and the dollar value of Bitcoin and the market as a whole look to continue shaking the cryptocurrency space for the time being.