Cryptocurrency exchange Coinbase announced Tuesday it would cut 18% of its workforce as fears of a recession mount and crypto values plummet, shedding sometimes thousands of dollars per share by the day.
The cuts will affect roughly 1,100 workers, leaving the firm with a staff of roughly 5,000. Coinbase's stock fell more than 5%, and crypto shares continued to see volatility: Bitcoin lost 6.6% to trade near $21,500. The leading cryptocurrency has lost more than two-third of its value in the past seven months.
Coinbase chief executive and co-founder Brian Armstrong anticipates a recession in the coming months and a corresponding "crypto winter" that "could last for an extended period," he wrote in a note to employees announcing the layoffs.
The Federal Reserve is moving swiftly to raise interest rates with the goal of suppressing price inflation, but higher rates typically make investors more averse to riskier bets such as crypto and tech stocks.
In that climate, Armstrong wrote, "we want to ensure we can successfully navigate a prolonged downturn."
"Our team has grown very quickly ... and our employee costs are too high to effectively manage this uncertain market. The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged," he said.
Coinbase's layoffs were effective immediately. Armstrong's message was sent to all employees, and those affected received it on their personal emails rather than on work accounts.
Those cut will receive 14 weeks of severance pay, plus two weeks for every year of employment with the company past one year. Coinbase will also cover four months of health insurance for U.S. employees and four months of mental health care for international employees, Armstrong said.
He wrote that the decision to cut staff was attributed to the need to manage the company's expenses and "increase efficiency."
"Both of these come back to my decision to significantly scale our team back over the past two years, so this accountability rests fully with me," he said.
In 2020, the year Coinbase went public, Armstrong made $60.5 million in total compensation, according to public securities filings, including a $1 million salary, $56.6 million in stock options and $1.8 million in "personal security" expenses.