Winter is here
Coinbase’s CEO, Brian Armstrong, announced yesterday that the crypto-exchange would be cutting 20% of its workforce. As a bellwether for the sector, Coinbase’s second round of cuts — following an 18% reduction in headcount back in June 2022 — suggests the “crypto winter” is yet to show any signs of thawing.
Self-help
These recent layoffs, along with other restructuring measures, aim to bring Coinbase’s operating expenses down 25% this quarter to offset falling revenues that have tumbled alongside digital asset prices and activities.
The measures may help reverse some of the 82% slide in Coinbase's share price over the last 12 months, but the biggest driver of Coinbase’s fortune is simply still the prices of digital assets. The weekly returns of both Coinbase’s shares and Bitcoin, show that they move almost in lockstep. It seems nearly impossible for the company to get back to where it was without an uptick in crypto trading, prices or both.
Armstrong admits the impact that external factors have had, saying that thanks to “unscrupulous actors in the industry” the crypto world now has a “black eye”, presumably a reference to disgraced FTX founder Sam Bankman-Fried. Additionally, the extra scrutiny the sector is now receiving from regulators will likely add to expenses, with Coinbase receiving a $50m fine this year from New York regulators and having to commit another $50m towards the company’s compliance.
