Coinbase, an American cryptocurrency exchange, is pruning its workforce by 18% in preparation for a recession it says could lead to another crypto winter.
A crypto winter is a period of a downward spiral in cryptocurrency prices.
Brain Armstrong, Coinbase’s Chief Executive Officer and Co-Founder, made the decision public on Tuesday in a message published on the exchange’s blog.
“Today, I am making the difficult decision to reduce the size of our team by about 18%, to ensure we stay healthy during this economic downturn,” Armstrong said in the statement.
Coinbase’s action comes two weeks after Gemini, a rival cryptocurrency exchange, also shed 10% of its staff, citing “current macroeconomic and geopolitical turmoil.”
In the statement, Armstrong explained that economic conditions are changing rapidly and a recession could lead to another crypto winter which could last for an extended period.
The CEO noted that trading revenue, the exchange’s largest revenue source, slumped significantly during previous crypto winters.
“While it’s hard to predict the economy or the markets, we always plan for the worst, so we can operate the business through any environment,” he said.
Speaking further, the Co-Founder of Coinbase noted that the exchange “grew too quickly,” and had "over-hired" while trying to take advantage of the explosion in the adoption of crypto products.
Armstrong pointed out that managing the exchange’s costs is, therefore, critical in down markets.
“Coinbase has survived through four major crypto winters, and we’ve created long term success by carefully managing our spending through every down period,” the CEO said.
“Down markets are challenging to navigate and require a different mindset,” he added.
Explaining how the job cut decision was reached, Armstrong noted that the exchange’s team had grown very quickly in fourfold over the past 18 months.
He added that the firm’s employee costs are too high to effectively manage in “this uncertain market.”
Moreover, Armstrong explained, “For the past few months, adding new employees has made us less efficient, not more.
“We have seen ourselves slow down considerably due to coordination headwinds, and difficulty fully integrating new team members.
“We believe the targeted [resource] changes we are making today will allow our organization to become more efficient.”