Coinbase lays off 18% of staff as crypto sell-off continues

Yahoo Finance crypto reporter David Hollerith joins the Live show to examine Coinbase's employee layoffs amid the crypto sell-off, which analysts are calling a "crypto winter", and how crypto-tied companies are fairing in the digital asset market volatility.

Video transcript

- Well, if you're looking for some good news, you won't find it in crypto. The biggest US crypto exchange, Coinbase, plans to lay off 18% of its workforce, about 1,100 people, in a rough start for crypto this week, with the crypto market cap falling below $1 trillion for the first time since early 2021. Yahoo Finance's David Hollerith is with us. David, Coinbase, as we see, pouring gasoline on the fire.

DAVID HOLLERITH: That's right. So this morning, Coinbase filed an 8-K with the SEC and then also published a blog post on their website, announcing this 18% staff reduction. So the reduction shrinks the company's workforce from by 1,100 to 5,000 employees total. The announcement sort of follows what we've seen from other cryptocurrencies companies. Firms that have announced layoffs in the past two months have been competitors Gemini, Crypto.com, Robinhood, as well as the crypto lender BlockFi.

Now, these layoffs also include a $40 to $45 million restructuring plan, which you can imagine is being used to change Coinbase's outlook now that they have more than 1,000 employees. And the employees also get about 14 weeks of severance pay. Now, the important thing to note here is that like these other company announcements crypto firms have made about staff layoffs, Brian Armstrong, the company's CEO, said in a blog post today that the current macroeconomic forces, a possible recession, and the dreaded crypto winter are reasons for this.

Now, interestingly though, Armstrong also cited the fact that Coinbase has grown too much since 2021, the beginning of 2021 at the beginning of the crypto bull market. And I think this all shows that maybe Coinbase was not expecting what we've seen in the crypto market, which is interesting, obviously, because crypto does go through bull and bear cycles ever since it started.

- Well, David, what's the sentiment today because when you take a look at the price of Bitcoin falling further once again, off another 4 and 1/2%, just above $22,000. Are investors expecting this type of volatility to continue? And do you think we could potentially see further losses there?

DAVID HOLLERITH: I mean, I think if you look at today in one way, Seana, I mean, it's much better than yesterday. Yesterday, Bitcoin saw its biggest decline since March 2020, which obviously was when the pandemic started, which shook all markets. So yesterday was extremely difficult. There's a lot of open questions that remain right now about crypto firms and where they are financially.

Essentially, what we're seeing is a combination of the macroeconomic side of what's happening with monetary policy in addition to a lot of crypto firms using highly leveraged strategies to generate yield in different ways. And the combination has been that a lot of firms are needing to pull back. And with Coinbase, that's an example of hiring. But we don't really know what it means. Celsius, the crypto lender, is a big question mark right now. And all investors and analysts are sort of trying to gauge what might happen there.

- OK. David Hollerith, appreciate that with the latest on this crypto winter.