Coinbase lays off 18% of its employees, CEO Brian Armstrong says the exchange 'over-hired' in 2021

Coinbase (Image: AP)

As the crypto crash gets worse with Bitcoin at around $21,900, the world's third-largest cryptocurrency exchange Coinbase said on June 14 that the company will lay off 18 percent of its employees.

Coinbase CEO Brian Armstrong made the announcement on a blog after the company made multiple changes to its hiring strategy over the past two months, saying that the company 'over-hired' when it was growing.

"Today I am making the difficult decision to reduce the size of our team by about 18%, to ensure we stay healthy during this economic downturn....but first I want to start by taking accountability for how we got here. I am the CEO, and the buck stops with me," Armstrong's blog read.

The CEO blamed the current recession and the possibility of the crypto winter lasting long as reasons for this decision.

Armstrong also said that the company which had 1,250 employees at the beginning of 2021 'grew too quickly'.

"At the time, we were in the early innings of the bull run, and adoption of crypto products was exploding. There were new use cases enabled by crypto getting traction practically every week. We saw the opportunities but we needed to massively scale our team to be positioned to compete in a broad array of bets."

"It’s challenging to grow at just the right pace given the scale of our growth (~200% y/y since the beginning of 2021). While we tried our best to get this just right, in this case, it is now clear to me that we over-hired," Armstrong said.

1/ Today I shared that I've made the difficult decision to reduce the size of our team at Coinbase by about 18%. The broader market downturn means that we need to be more mindful of costs as we head into a potential recession.

— Brian Armstrong - barmstrong.eth (@brian_armstrong) June 14, 2022

He added that the company’s employee costs are too high to effectively manage this uncertain market and reiterated that the accountability rests with him as the changes are being made because of his earlier decision to significantly scale the team over the past two years.

The move comes after the company withdrew a few offers it had extended. The announcement was made on June 3 in a blog post by chief people officer LK Brock on the company’s website.

Moneycontrol had reported on June 7 how many Indians whose offers were withdrawn were left in the lurch with no jobs in hand and lost opportunities.

Many refused admissions to higher studies to accept a job at Coinbase. Other Indians were on a deadline before their visa in the US expires and will be forced to come back home if they don’t get a job in the US soon.

At the beginning of this year, Coinbase had announced its plans to hire 2,000 people across product, engineering and design in 2022. For its India foray, the company had announced a target of hiring 1,000 employees in the country.

Trouble started for Coinbase and the crypto world as global macro factors began falling apart starting with the Russia-Ukraine war, which led to a steep fall in the stock markets with tech stocks being the worst hit. This was followed by a crash in the crypto markets, and experts expect this downcycle to stay for some time.

Since January 2022, Coinbase’s stock has fallen by close to 80 percent. In the first quarter of 2022, the January to March quarter, the company’s revenues fell 27 percent over the same quarter of 2021.

For the first time since its listing, expenses at $1.72 billion exceeded revenues at $1.17 billion, prompting the company to cut costs.

Announcing a change in strategy, the company had first said on May 17 that it plans to slow hiring and reassess its headcount needs against its highest-priority business goals, amid downturn cycle of the crypto market.

In India, Coinbase suspended its UPI payment method after a mega launch. During the company's earnings call, Armstrong had said that this was due to 'informal pressure from RBI.'

While the exchange had said it is working with the RBI to become operational in India, the plans seem to have taken a back seat amid the slowdown and layoffs.