Coinbase (NASDAQ: COIN) has tossed nearly one-fifth of its workforce overboard as the struggling cryptocurrency exchange struggles to stay afloat following inept leadership decisions.
On Tuesday, Coinbase CEO Brian Armstrong issued a note to all company staff informing them that he’d made “the difficult decision to reduce the size of our team by about 18%, to ensure we stay healthy during this economic downturn.” Based on Coinbase’s current staff count, the unemployment axe will fall on around 1,100 necks.
Armstrong’s announcement stands in stark contrast to his comments in early May, in which he insisted that Coinbase’s plan to triple its existing workforce by the end of this year wouldn’t be impacted by the company’s $430 million net loss in the first quarter of 2022.
But by May 16, the company warned that it was “slowing hiring so we can reprioritize our hiring needs against our highest-priority business goals.” Things got worse on June 2, when Coinbase announced that it would “rescind a number of accepted offers,” a move that left over 300 individuals scrambling to make alternate plans.
Coinbase’s cuts seem all the more abrupt given that the company added around 1,200 bodies to its staff count in Q1, which President/CFO Emilie Choi said at the time was about determining “what the product goals are and then how do we amplify them through the addition of headcount.”
But that was back when the concept of ‘crypto winter’ was merely a slightly chillier start to ‘crypto summer’ and not full-on Snowmageddon. It was also back when the idea of dropping $14 million on a 60-second Super Bowl commercial still seemed a responsible way of managing one’s reserves in case of a crisis.
Boil that frog
The manner in which Coinbase’s staffing problems were revealed to the world—(a) we’re still hiring as usual, (b) we’re slowing hiring, (c) we’re no longer hiring the people we said we’re hiring, (d) one-fifth of you need to GTFO—suggests senior management is either in deep denial of their reality or strongly aware of their reality but desperate to prove that they’re not completely inept.
Coinbase appears to have been hoping that the media would react to the steady drip of bad news much like the proverbial frog being cooked in a slowly warming pot. In other words, by the time the major layoff news arrived, the frog-media’s senses would be too dulled by the previous announcements to care, and thus the company’s already tanking share price wouldn’t reach terminal velocity.
Incredibly, it seems to have worked. Coinbase shares took a far bigger dive on Monday—when news of the Celsius implosion rocked the overall crypto markets—than they did when Armstrong announced the layoffs. Coinbase shares even posted a modest gain on Wednesday, albeit with a hefty wind-assist from the Federal Reserve’s surprise 0.75% interest rate hike. But the share price is still down around 80% from its 2021’s peak, so maybe keep the corks in the champagne bottles a bit longer.
I learned bedside manner from Dr. Kevorkian
The method by which affected Coinbase staff learned whether or not they still had a job was undeniably harsh. Armstrong’s blog post revealed that “in the next hour every employee will receive an email from HR informing if you are affected or unaffected by this layoff.” In other words, Coinbase staff were given an hour to sweat it out while wondering whether they needed to update their resumes.
Armstrong also stated that the employees being fired “will receive this notification in your personal email, because we made the decision to cut access to Coinbase systems for affected employees … given the number of employees who have access to sensitive customer information, it was unfortunately the only practical choice, to ensure not even a single person made a rash decision that harmed the business or themselves.”
Armstrong’s paranoia might seem insensitive were it not for the online petition that circulated earlier this month. That since-deleted missive featured some unidentified Coinbase staff seeking ‘a Vote of Non Confidence’ in CFO Choi, Chief Product Officer Surojit Chatterjee and Chief People Officer LJ Brock based on their perceived inability to do their jobs in a manner that ensured the future health of the company.
The three execs’ alleged shortcomings included “aggressively hiring for thousands of roles, despite the fact that it is an unsustainable plan and is contrary to the wisdom of the crypto industry.” The petition also heaped derision on Coinbase rescinding job offers despite having reassured the impacted individuals two weeks earlier that the offers were still valid, “leading to a massive negative reception from the public and the industry at-large.”
Armstrong’s public response to this “really dumb” and “deeply unethical” petition was a 16-tweet thread excoriating the authors for, among other things, not including himself in the list of inept execs. (“Who do you think is running this company?” he asked, accidentally omitting ‘into the ground.’) Armstrong further warned the authors that “if you get caught you will be fired” and urged the malcontents to “quit and find a company to work at that you believe in.”
Ironically, Armstrong claimed that the petition was a waste of time, because “99.9% of the company has important work to do.” He clearly meant 81.99%, given that 18% of this group’s work was later deemed sufficiently unimportant for them to stick around another week.
The Wright stuff
Coinbase is far from alone in pushing people off its payroll, with fellow platforms Gemini, Crypto.com and BlockFi all significantly trimming their headcounts this month. Contrary to what we’ve been led to believe, it seems that fortune occasionally favors the prudent, at least when it comes to dealing with a serious market crash.
However, Coinbase faces additional headwinds that these other firms don’t, specifically, the ‘passing off’ lawsuit filed by Dr. Craig Wright—the real-world individual behind Satoshi Nakamoto, pseudonymous author of the Bitcoin white paper—against both Coinbase and rival exchange Kraken for misrepresenting the ‘Bitcoin Core’ (BTC) digital asset as Bitcoin.
Much as Coinbase was gaslighting the markets regarding its ability to maintain its payroll, the exchange has so far avoided any official mention of Dr. Wright’s legal claim, despite the fact that (a) Coinbase’s prospectus specifically cited “the identification of Satoshi Nakamoto” as a potential threat to their future earning power, and (b) the damages from Wright winning his claim could prove an existential threat to Coinbase shareholders.
Wright’s suit is based on the fact that Bitcoin SV is the only protocol that honors the white paper’s vision of peer-to-peer electronic cash, with transactions happening on-chain for fees measured in fractions of a cent. BSV is focused on utility, while Coinbase is only interested in charging commissions on function-free tokens it lists (often without disclosing its own financial interest in said tokens).
For Coinbase’s sake, let’s hope the company banks some of the cash it’s saving from shilling shitcoins and turfing staff. If Armstrong thinks he’s shivering through ‘crypto’ winter now, that bald head of his will be a popsicle once Wright’s ruling comes down.
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