The crypto winter is apparently not over yet. Coinbase announced Tuesday that it was laying off 950 people, about 20% of its staff. The job cuts come only a few months after another major round of layoffs. The crypto brokerage firm let 1,100 people go in June, about 18% of its headcount at the time.
Coinbase, like many other publicly traded and privately held crypto companies, has been hit hard by the massive plunge in the price of bitcoin and other cryptocurrencies. The price of bitcoin is hovering around $17,000 after peaking near $65,000 in late 2021.
Some crypto fans have been encouraged by the solid start for bitcoin so far in 2023. Bitcoin is up more than 4% since the start of the year, suggesting that crypto prices may have finally bottomed out.
The hope is that bitcoin and other crypto prices may start to stabilize, especially if financial regulators start to provide more guidance and clarity about their stance on cryptos. That could mean the worst is almost over.
“A large portion of the capitulation move has already opened and the tide could be changing soon,” said Naeem Aslam, chief market analyst at AvaTrade, in a report Tuesday. He suggested that if bitcoin is able to rally back to above $20,000, then that “could revive some confidence among traders.”
Still, bitcoin bulls don’t have much to cheer just yet. Shares of Coinbase, which went public in April 2021 and hit an all-time high of near $370 a share later that year, have since plummeted to about $43 – an almost 90% drop from their peak.
The stock did rise nearly 13% Tuesday after the layoffs were announced. Coinbase is now up more than 20% so far in 2023.
Coinbase CEO Brian Armstrong stressed in a blog post Tuesday that the company “is well capitalized, and crypto isn’t going anywhere.”
But Armstrong added that layoffs were necessary because “we need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge.”
The free fall for bitcoin has led to a crisis of confidence in the industry. Several high profile crypto companies have gone belly up, most notably one-time crypto darling (and Coinbase rival) FTX.
The Sam Bankman-Fried led firm was once valued at $37 billion before it filed for bankruptcy. Bankman-Fried, or SBF as he’s more commonly known, has since been arrested, was extradited from the Bahamas and is now awaiting trial in the US.
SBF has been charged with alleged wire fraud, conspiracy to commit money laundering and several other crimes.
In what could be construed as a jab at FTX and other bankrupt crypto firms, Armstrong said in the blog post that “dark times also weed out bad companies, as we’re seeing right now.”
Armstrong added that “we also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion.”