(CapitalWatch, June 20, New York) Last week Coinbase laid off 18% of its staff, adding to the pile of fiascos in the cryptocurrency market.
Coinbase Global Inc. (Nasdaq: COIN) is the largest U.S. cryptocurrency exchange platform and the first major company of its kind to go public. The IPO was hailed by crypto investors as a milestone of bringing the coins out of obscurity.
After a year of buzz and rising value for many cryptocurrencies, the rapid shift in markets from recovery to relapse has started a tailspin.
Brain Armstong, Coinbase's CEO and co-founder, said that the company's dramatic cutbacks were caused by a recession on the horizon. Forbes cited Armstrong saying he expects a "crypto winter," in which crypto prices will drop and stay low for some time. Armstrong added that the company's trading revenue dropped heavily in past winters.
The layoffs appear to be part of the company's efforts in preparing for the worst. Over the weekend, Armstrong also said the company can't promise that there won't be future layoffs to come. Coinbase admitted that it had overhired.
Additionally, SFGate reported that the milestone of Coinbase's decline was its splurge on an unusual Super Bowl ad.
Coinbase's ad showed only a QR code that bounced around the screen mimicking classic DVD screensaver. Despite its complete lack of branding and untraditional campaign, Coinbase's ad proved successful after the company saw a more than 300% week-over-week increase in downloads.
The strategy got results, but it seems that wasn't enough to offset the massive price tag.
Less than a year after cryptocurrency had picked up in earnest, the market started sliding and Coinbase's overextension pushed the company to its limits.
So far this year, Coinbase has laid off 1,100 employees.
The stock in Coinbase slipped 35 cents in after-hours trading after the company closed at $51.22 per share Friday. The company has seen a roughly 10% recovery last week, but it's tumbled close to 80% over the past six months.
The top crypto coins aren't faring much better than the platform they're traded on either. Bitcoin fell about 1% Monday, and down about 57% in the past six months. It has lost over half of its value so far in 2022 after peaking at $69,000 in November 2021.
The crypto crash, as well as the inflation and bear market, is reverberating throughout the tech industry. Coinbase is just one among several major companies that have seen rounds of layoffs this year. According to layoff tracker layoffs.fyi, more than 220 U.S. companies have seen layoffs so far in 2022, 46 of which were finance companies.
Paypal cut 83 employees in April. The company also decided to close its San Francisco offices, but the company said that decision wasn't related to the layoffs.
Robinhood (Nasdaq: HOOD) also dropped 9% of its full-time staff in April, with CEO Vlad Tenev saying that the company's rapid growth led to duplicated positions and overstaffing. The company grew net funded accounts from $5 million in 2019 to over $1.8 billion in 2021, Tenev said. As a result, the company expanded its staff by almost six times the original amount.
"Throughout 2020 and H1 2021, we went through a period of hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus," Tenev said in a blog post.
The data science-based styling service Stitch Fix (Nasdaq: SFIX) also dropped around 9% of its workforce in May. The company's CEO Elizabeth Spaulding said in a blog post announcing the layoffs that the move was necessary since the company is in, "the midst of a transformation."
"There will be tough choices along the way, and this is one of those," Spaulding wrote.
Cryptocurrency and the American tech sector's decline could be signaling the end of a golden era of exorbitant spending, and profit, for the industry.