For Coinbase, the future is unknown.
The cryptocurrency exchange is still struggling to emerge from the difficult period that the industry has been going through over the past 12 months.
Compared to its all-time high of $3 trillion hit in November 2021, the cryptocurrency market has lost close to $2.1 trillion. According to estimates, the market is currently valued about $886 billion.
The most well-known digital asset, bitcoin, has fallen 75% of its value since reaching an all-time high on November 10, 2021, when it reached $69,044.77. The price of one bitcoin is currently $17,233.76. Since 2023, the king of cryptocurrencies’ prices has largely steadied.
Mistrust is the main issue facing the new financial services sector driven by blockchain. The general public’s mistrust brought on by a number of scandals following the 2021 crypto-mania.
Difficult Choice
Sister tokens Luna and UST fell over night in May of last year, costing retail and institutional investors billions of dollars in damages. Due to the credit bottleneck brought on by this catastrophe, the hedge fund Three Arrows Capital, or 3AC, was driven into liquidation. Voyager Digital and Celsius Network, two prominent crypto lenders, have filed for Chapter 11 bankruptcy.
The dominoes game exposed the symbiotic links and interdependence between the crypto space’s actors. Many of the users of these platforms who lost their cash were not aware that their funds were frequently lent to other businesses.
Sam Bankman-Fried’s crypto business failed in November. The former dealer was the institutional face of cryptocurrency, therefore this catastrophe was a big surprise. During the financial crunch, he had helped several businesses, and in February of last year, his bitcoin exchange FTX was valued at $32 billion.
All the casualties of the FTX debacle are yet unknown. The biggest, though, is still the total loss of faith in the cryptocurrency sector. Retail investors have left the industry, and institutional investors are much more cautious, especially given that this year is predicted to be a recession.
Coinbase attests to this. The platform just disclosed the loss of around 1,000 additional positions. 950 jobs, or 20% of the present workforce of Coinbase (COIN), will be lost.
CEO Brian Armstrong wrote in a blog post on January 10 that they need to make sure they have the proper operational efficiency to weather downturns in the crypto market, and capture opportunities that may develop. As a result, he has decided to make the difficult decision to let go of roughly 950 workers in order to cut our operational expense by about 25% Q/Q.
Painful
Armstrong stated this is the first time they have seen a crypto cycle coincides with a more general economic slowdown. As they looked at their 2023 scenarios, it became obvious that they would need to cut costs in order to improve their chances of succeeding in each one. Even though it is always difficult to part ways with coworkers, there was no way to considerably cut company costs without taking headcount adjustments into account.
As a result, Coinbase will terminate numerous projects.
The business stated in a regulatory filing that all of these steps will incur a charge of between $149 billion and $163 billion. These expenses, which mostly consist of severance pay and other termination benefits, will be reported in the first quarter of 2023.
The cryptocurrency company also stated that it anticipates adjusted EBITDA losses for the entire year to fall under a previous $500 million “guardrail” established last year.
The latest employment losses by Coinbase mark the company’s second round of layoffs in less than a year. The corporation lay off 1,000 workers in June of last year, or 18% of its workforce.
These layoffs signal the end of a period of robust and brazen expansion for the cryptocurrency sector, which had benefited Coinbase. The platform’s IPO occurred in April 2021. Thus, the shares had risen to $341.
But last year, they experienced a severe decline. At the current price of $38, the stock has decreased by 89%.
