Coinbase sacked 18% of employees to tackle “Crypto Winter”

Nothing remains stable in the crypto market. Everything changes in a night here. So it is foolish to say that one can fully understand the whole dynamics of cryptocurrency. The very recent case of such delusion is the downfall of the American cryptocurrency exchange platform Coinbase. On Tuesday, the co-founder and CEO of Coinbase announced that the company is going to sack 18 percent of its employees to tackle the “Crypto Winter”.

“Crypto Winter” is the expression used in the cryptocurrency market when the trading prices of cryptocurrencies tumble down continuously for an extended period.

Examples of Terra blockchain and celsius network failures are still echoing in the market; additionally, the price of Bitcoin has also plummeted, putting a strain on the uprise.

Coinbase’s business had already declined in the first quarter, but the situation has now reached a point where the company is trying to cut expenditures dramatically.

Coinbase’s decision comes just two weeks after Gemini, a competitor cryptocurrency exchange, also sacked 10% of its workforce, alleging “present macroeconomic and geopolitical uncertainty.”

Coinbase released statement

Coinbase crypto exchange started trading last year with its share price going as high up to $350 but now has fallen to the $52 mark with a market capitalisation of nearly $12 billion at the time of writing.

Last month, Coinbase notified that it would retract the job offers and freeze down the hiring process. But Coinbase CEO Armstrong on Tuesday released the statement that he had several discussions with his management team over the last month before making this choice.

According to him, the layoffs are primarily due to fast-changing economic conditions, managing costs in crypto winter, and the company developing “too quickly,”.

Coinbase CEO stated that the affected employee would receive the news in a personal email from HR, and they could directly converse with the organisation’s senior leaders.

The affected employees will no longer have access to the Coinbase system. The affected employees will receive a minimum of 14 weeks of severance pay. Laid-off employees can have the Four months’ benefits of the COBRA health support.

Armstrong explained that managing the exchange’s costs in falling markets is crucial. Navigating down markets is complex and necessitates a different mindset.

“Coinbase has withstood four big crypto winters, and we’ve built long-term success by carefully limiting our spending throughout each downturn,” stated the CEO.

Employee costs soared due to the company’s nearly fourfold growth in the last 18 months, and they were “too high to efficiently handle this uncertain market,” according to the CEO.

From strong growth to downsizing

Coinbase’s strategy to make money revolves around transaction charges, but when the excitement toward cryptocurrency declines, the downfall in profits and revenue are predestined.

Coinbase’s sales fell by 27% to nearly $1.17 billion in the first quarter, while its net income fell by more than $1 billion, incurring a loss of $430 million over a year.

Coinbase made a lot of money in 2021, but those profits have evaporated. And to keep in mind that Coinbase’s first quarter finished before much of the recent bitcoin market volatility, Coinbase’s situation is only going to become worse in the remaining quarters of 2022.

In the first quarter of 2022, the Crypto exchange spent $1.2 billion on the operations.  Laying off nearly 1100 employees from its workforce will create the chances of gaining control back. Still, according to the cryptocurrency market trends, a significant loss is predicted for Coinbase in 2022.

As interest in cryptocurrencies dwindles, there’s genuinely no bottom for revenue. Thus, Coinbase may need to take more dramatic measures if things continue to deteriorate.

Future of the Coinbase Stock

Bitcoin has lost more than half of its value so far this year. It is currently trading at roughly $23,000 after reaching a record high of more than $69,000 in November 2021.

Storm in the Cryptocurrency market is not going to settle down for now.

In the past six months, share prices of crypto exchange platform Coinbase have faced the storm’s severity as its prices have seen a downfall of 85 per cent.

It is no longer a massive profit-making crypto platform, and its growth will take a heavy hit. After the layoff news, on Tuesday morning, Coinbase’s stock jumped around 1% in pre-market trade.

However, in regular trading, shares were down by roughly 3% at $50.40. Coinbase predicted the total restructuring costs would range from $40 million to $45 million.

Coinbase has a few billion dollars in net cash on its balance sheet, which allows it to tolerate losses for the time being. However, if the crypto meltdown worsens throughout the year, much of that money will be spent quickly.

If Coinbase does not manage to close the gaps in its deficits, the cryptocurrency will experience a loss of the trust of investors also.

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