Coinbase to Slow Hiring Spree as Users Drop Off

Entering 2022, the company had planned to triple its head count, Ms. Choi said, but that goal has been shelved. “Given current market conditions, we feel it’s prudent to slow hiring and reassess our head count needs against our highest-priority business goals,” she wrote.

The statement didn’t provide further details about the action. The company hired 1,200 people in the first quarter, according to its latest earnings report. It had 3,730 employees at the end of 2021. Leading up to 2022,

Coinbase

COIN 6.96%

had planned to triple its workforce, said Ms. Choi.

The company isn’t planning to slow down its pace of product development, communications director

Elliott Suthers

said in a statement to The Wall Street Journal. The company will focus on integrating new employees with existing teams, with a focus on its existing plans and particularly international expansion, he said.

Last week, amid a punishing selloff in the crypto markets, Coinbase surprised investors by posting a first-quarter loss of $430 million, or $1.98 a share. It reported that the number of active users fell in the quarter, a big headwind since the company gets virtually all of its revenue from transaction fees. The company also said it expects user declines in the second quarter.

Shares are down about 72% this year, and about 80% from its November record of $357.

Tuesday’s news of the hiring slowdown actually bolstered shares. Coinbase stock rose about 13%, closing at $70. 

Coinbase’s announcement is the latest example of how the crash in prices is affecting the companies in the sector, a pattern that was also evident in the last “crypto winter.” 

Crypto markets are largely reliant upon momentum trading and speculative fervor. That enthusiasm has been in short supply this year across markets. As the Federal Reserve has increased interest rates, investors have moved away from the riskiest assets.

Coinbase, which just marked the 10-year anniversary of its founding in 2012, is one of the most prominent crypto companies and the first large company in the industry to go public, which it did last year.

Initially, the company was very profitable. In its first three quarters as a public company, it posted a combined profit of $2.8 billion. That helped the company build up its current cash surplus of about $6 billion.

This year has been a different story, though. The crypto markets have fallen badly amid the wider selloff in the capital markets. That selloff has squelched a lot of the trading activity that companies such as Coinbase rely upon for revenue.

The price of bitcoin, the first and largest cryptocurrency, fell as much as 63% from its November records. While historically volatile, the asset has had only three selloffs larger than that, according to research firm Visual Capitalist. 

Coinbase is certainly not alone in its struggles. Myriad companies across the economy are cutting employees as interest rates climb, stock markets fall and economic concerns rise.

Shares of other publicly traded crypto companies have fallen sharply this year.

Silvergate Capital Corp.

is down 46% in the year to date,

Marathon Digital Holdings Inc.

has fallen 66%, and

TeraWulf Inc.

has lost 78%.

MicroStrategy Inc.,

a software company that has become a major bitcoin holder, is down 59%.

Write to Paul Vigna at [email protected]