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Coinbase (COIN) is reducing its workforce again amid a collapse in its stock price, turmoil in crypto land, and broader macroeconomic headwinds. 

The cryptocurrency exchange will cut approximately 20% of its workforce, or about 950 jobs, in a second round of layoffs in less than one year. Coinbase had 4,700 employees at the end of September and had already slashed its headcount by 18% in June last year. 

"Therefore, I've made the difficult decision to reduce our operating expense(1) by about 25% Q/Q, which includes letting go of about 950 people(2). All impacted team members will be informed by today," CEO Brian Armstrong wrote in a letter to employees. 

Armstrong explained the company will be "shutting down several projects where we have a lower probability of success." He said those teams have already had their access to internal systems stripped and will be contacted by the company today.

Affected team members will receive an email to their personal account in the next hour with more information, and an invitation to meet with an HRBP and senior leader. Coinbase system access has already been removed. I realize this last step feels sudden and harsh, but I believe it's the only prudent choice given our responsibility to protect customer information.

He added that the firings weren't due to job performance but based on economic turmoil in the broader economy and the crypto space. 

To those of you who will be leaving, please know that this is not a reflection of your work or contributions to Coinbase. I believe we have an incredible team, and all of you have been important members of that. Instead, it's a reflection of the current economic climate and crypto market. 

He continued:

Progress doesn't always happen in a straight line, and sometimes it can feel like we're taking two steps forward and one step back. But just like we saw with the internet, the most important companies not only survive but thrive during down markets by being rigorous with cost management, and continuing to build innovative products.

Armstrong considers the current environment "dark times." He warned last June:

We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period.

Coinbase shares in premarket trading are down nearly 3%. Since the IPO in the spring of 2021, shares have plunged 89%.

As for Bitcoin, it's down nearly 75% since peaking at around $67.7k in late 2021. 

***

Here's Armstrong's full letter to employees:

Team,

In 2022, the crypto market trended downwards along with the broader macroeconomy. We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion.

Coinbase is well capitalized, and crypto isn't going anywhere. In fact, I believe recent events will ultimately end up benefiting Coinbase greatly (a large competitor failing, emerging regulatory clarity, etc.), and they validate our long term strategy. But it will take time for these changes to come to fruition and we need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge.

Therefore, I've made the difficult decision to reduce our operating expense(1) by about 25% Q/Q, which includes letting go of about 950 people(2). All impacted team members will be informed by today.

I'd like to explain how we got here, what it will mean for those impacted, and how we'll move forward. I also want to be clear that, while some of the factors that have brought us to this point are beyond our control, accountability rests with me as the CEO. We also reduced headcount last year as the market started to correct, and in hindsight, we could have cut further at that time.

How we got here

Every year we do our annual planning process where we run different scenarios for revenue: bull, base, and bear. The crypto industry is difficult to predict, but it's important to have planning in place that ensures we can succeed as a business in multiple potential outcomes. Over the last decade, Coinbase has made it through multiple bear markets using this process. This is the first time we've seen a crypto cycle coincide with a broader economic downturn, but otherwise it is similar.

As we examined our 2023 scenarios, it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario. While it is always painful to part ways with our fellow colleagues, there was no way to reduce our expenses significantly enough, without considering changes to headcount.

As part of a headcount reduction like this, we will be shutting down several projects where we have a lower probability of success. Affected teams will receive communication on this today. Our other projects will continue to operate as normal, just with fewer people on the team. We will share more detail publicly on our expense outlook in a public 8-K filing today and on our Q4 earnings call in February. 

Affected team members and transition support

Affected team members will receive an email to their personal account in the next hour with more information, and an invitation to meet with an HRBP and senior leader. Coinbase system access has already been removed. I realize this last step feels sudden and harsh, but I believe it's the only prudent choice given our responsibility to protect customer information.

To those of you who will be leaving, please know that this is not a reflection of your work or contributions to Coinbase. I believe we have an incredible team, and all of you have been important members of that. Instead, it's a reflection of the current economic climate and crypto market. 

We will be providing a comprehensive package to support you through this transition. For those of you in the US, this includes a minimum of 14 weeks base pay (2 additional weeks per year worked), health insurance, and other benefits. We are also providing extra transition support for impacted employees on a work visa. Those of you outside the US will receive similar support in line with the employment laws of your country. 

We're also giving everyone access to our Talent Hub to help connect you with your next career opportunity. Coinbase employees are among the most talented in the world, and I'm certain that your skills and experience will stand out, even in a challenging job market.

Moving forward

To everyone we're losing, I want to sincerely thank you for everything you've done here. You've played a huge role in making crypto more trusted and easy to use, and our customers and the world are better for it.

To everyone who is staying, I know this is a challenging day. This latest downturn has caused plenty of fear and anxiety. Thank you for your resilience. Our mission is more important than ever, and these changes will ensure we build an enduring company during this period.

This is also a moment where I'd like us to focus on our startup culture, and remember what it feels like to have small, nimble teams that are able to get more done. As Coinbase grew so quickly in 2021, we all felt the coordination headwind that caused us to move more slowly. Over the past ten years, we, along with most tech companies, became too focused on growing headcount as a metric for success. Especially in this economic environment, it's important to shift our focus to operational efficiency.

Despite everything we've been through as a company and an industry, I'm still optimistic about our future and the future of crypto. Progress doesn't always happen in a straight line, and sometimes it can feel like we're taking two steps forward and one step back. But just like we saw with the internet, the most important companies not only survive but thrive during down markets by being rigorous with cost management, and continuing to build innovative products.

Dark times also weed out bad companies, as we're seeing right now. But those of us who believe in crypto will keep building great products and increasing economic freedom in the world. Better days are ahead, and when they arrive, we'll be ready. Thank you for everything you've done to get us this far, and everything you will do to carry us forward.

Brian

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