Coinbase—the American-based cryptocurrency company, is set to dismiss some more employees because the bear market has remained irrecoverable. This latest wave of layoffs is Coinbase’s third since the market’s meltdown.
The leading cryptocurrency exchange is set to cut 950 jobs, and all impacted staff will be duly informed about the company management’s decision to ensure that the company does not collapse.
In the last quarter of 2022, several crypto startups and established institutions announced drastic staff layoffs because of the swirling gloom of the market’s backward drive. FTX, Celsius, and Voyager are some of the crypto companies that suffered hugely from the market’s winter spell.
The market downturn has been immense, and crypto companies have opted for a reduction of the workforce to stay functional. In June 2022, Coinbase dismissed 18% of its workforce after revenues shrank. Reports claim the 1,100 employees were offered dismissal letters at the time.
Within the last six months, Coinbase has had to cut its workforce three times to accommodate the excesses of the present devastating state of the crypto market.
More details about Coinbase’s layoff
Coinbase raked in immense profits during the historic boom of the cryptocurrency market—from 2020 to 2021. Within this period, Coinbase enjoyed significant revenues, which spurred the company to widen its horizon of the workforce and its cost base. Rumoured to have made $7.8 billion of revenue that year, Coinbase booked operating expenses of $4.8 million and a net income of $3.6 billion.
The cost of operations skyrocketed by a triple rate. Then the bearish pull spiralled in when it was least expected. The problem Coinbase faced with charging expensive fees to trade digital tokens with no real-world implications is that it is effective when many people think they can generate mouthwatering profit trading those digital assets.
Now, a lot fewer individuals hold that opinion. The confidence in the cryptocurrency economy has been shattered by falling cryptocurrency prices and scandals like the collapse of FTX. Coinbase’s revenue has dropped off a cliff as its users have sharply withdrawn.
The business produced just $2.6 billion in sales through the first nine months of 2022, a roughly 50% decrease from the previous year. Costs have kept rising like crazy. During those nine months, operating expenses reached $4.7 billion, an increase of around 50% from the previous year.
Even though the cryptocurrency market was already in trouble before FTX’s collapse in November, Coinbase CEO Brian Armstrong told CNBC that the scandal and its knock-on effects had “created a black eye for the industry” and that more fraud would probably be discovered as the industry scrutiny increased. To weather the storm, Coinbase is shuttering several projects with slim chances of success and redoubling its efforts to improve operational effectiveness.
Restructuring costs associated with the layoffs will total between $149 million and $163 million, almost all of which will be incurred in the first quarter of 2023. In the first quarter of 2023, Coinbase anticipates that its sales, marketing, technology, development, general, and administrative expenses will be roughly 25% lower than they were in the fourth quarter of 2022. A mix of layoffs and other cost-cutting measures will cause the drop.
One problem is that more than a 25% cost reduction is required. To make an operational profit in the first nine months of 2022, Coinbase would have had to reduce its operating costs by about 50%. Barring a new cryptocurrency bubble, the revenue will likely remain the same in 2023. Even with two rounds of layoffs, Coinbase will almost certainly continue to burn through cash.
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