- Crypto exchange Coinbase laid off 18% of its staff Tuesday amid turbulence in the economy.
- Experimental teams like Coinbase One and the NFT business, and customer support, were impacted.
- Former employees said spending habits, from Super Bowl ads to sky-high salaries, are to blame.
It was late 2021, and Coinbase, riding high from the crypto market’s record year, was building an armada of customer-support agents for its budding trading-subscription product, Coinbase One, in addition to general live support.
While crypto recruitment and compensation packages had made headlines for poaching top Wall Street and Silicon Valley execs and engineers, it wasn’t just senior or technical hires who enjoyed above-market pay packages.
One prospective agent did a double take at Coinbase’s salary offer for what amounted to a typical customer-service role.
“When I got hired, I was like, ‘Wait, what?’ You’re paying me how much to answer phones?” the former employee said of their $70,000 salary, which is nearly double the average annual salary of a call-center representative in the US, according to employment website Indeed.
“For what we did, they paid way too much and they hired too many people, honestly,” the former employee, who requested anonymity because they were not permitted to speak to the press, told Insider.
And they weren’t the only one on the firm’s near-400 person Global Support Team to think Coinbase’s compensation levels were untenable.
Another former employee, who managed a team of customer-support agents, saw the signs when they helped build out the organization at the beginning of 2022 by hiring hundreds of employees.
“We basically have what seems like a blank checkbook and that can’t work,” the former manager, who received a 40% pay bump when they ditched a financial-technology company to join Coinbase, recalled telling senior management during the recruitment period.
“Eventually the chickens are going to come home to roost,” the former manager said.
Indeed, on June 14, Coinbase CEO Brian Armstrong announced in a blog post the company was laying off 18% of its staff, or roughly 1,100 employees. Both the customer-support agent and the manager were among those who were let go.
As the largest cryptocurrency exchange in the US, Coinbase helped to drive, and benefited from, a surge in interest in crypto throughout the pandemic. Along the way, the firm attracted legions of top talent by offering exorbitant salaries and benefits, even by crypto and tech standards.
But Coinbase employees who were recently laid off told Insider that, even if they didn’t think job cuts would come as quickly or as drastically as they did, they felt tremors shaking Coinbase’s business as the crypto industry began to falter this spring. The former employees requested anonymity in order to speak freely, but their identity is known to Insider.
In the post announcing the layoffs, Armstrong acknowledged the firm hired too many people amidst a booming crypto economy.
“While we tried our best to get this just right, in this case it is now clear to me that we over-hired,” Armstrong said in the post.
The company more-than quadrupled its headcount over the past 18 months, Armstrong noted.
“Our employee costs are too high to effectively manage this uncertain market,” he added.
A representative for Coinbase declined to comment for this story.
Business was booming
Coinbase’s business mirrored that of the broader crypto industry throughout the pandemic. The exchange went public in a blockbuster 2021 direct listing with its
shooting above $100 billion at one point. It was a signal that crypto — or at least the industry’s biggest players — was here to stay.
The total volumes flowing through Coinbase surged from $80 billion in 2019 to $1.7 trillion in 2021, according to regulatory filings. The company’s net revenues consequently grew as well, jumping 1,400% between 2019 and 2021 to $7.8 billion.
Amid the crypto boom, Coinbase aggressively hired, poaching top talent from the likes of Microsoft, Google, and Goldman Sachs. This February, Coinbase’s Chief People Officer L.J. Brock wrote a blog post detailing the firm’s plans to hire 2,000 employees across product, engineering, and design teams. By May, Coinbase was already more than halfway there, adding 1,200 new staff. And that was after the company had tripled its headcount in 2021 with 2,400 new employees, compared to 750 in 2019.
High salaries and frenetic hiring weren’t the only signs of Coinbase’s generous spending. Earlier this year, the company spent an estimated $14 million on its infamous Superbowl commercial that consisted of a single QR code bouncing around the screen like a DVD screensaver.
And just a week before Tuesday’s layoffs, Coinbase’s Global Support Team enjoyed a four-day off-site in Austin, Texas, with the company flying in employees from India, Japan, Ireland, and England, the former customer-support manager said.
“It’s almost like they were telling us one thing while they were getting ready to do something else,” they added.
Even when things didn’t work out, Coinbase was generous.
Two former Coinbase employees whose team was restructured earlier this year said they were offered to either re-interview with the company or take a severance package that offered a minimum of six-months pay. Both took the package.
But the grow-at-all-costs strategy came with downsides.
Another former Coinbase employee who was let go Tuesday told Insider the company’s growth was “too fast, too inefficient.”
The rapid hiring caused confusion and a sense that Coinbase, even as it ballooned in size, retained a loose and chaotic startup culture.
One former employee who worked on Coinbase’s customer-experience team recalled feeling a sense of disorganization at the company as they onboarded last year; it only worsened leading up the layoffs.
“I chalked it up as a startup vibe, just like fixing an airplane in midair,” they told Insider.
The halting rollout of Coinbase One, the subscription trading service, exemplified the uncertainty with which some new products were developed. The firm’s budding subscription product that gives members access to $0-trading fees, slated to launch June 6, is still in beta, according to the former customer-support manager.
“As of June 6 it was supposed to go to 100% general availability, but I think that got delayed and I did not know the reason why — this might be the reason why,” the former manager said, who added the service was available to half of Coinbase’s customers as of June 1.
Even as Coinbase reiterated its desire to hire more staff in 2022, the crypto industry was being buffeted by bad headlines and falling prices this spring.
Amid the broader wave of selling hitting tech stocks this year, the price of major cryptocurrencies has tumbled. Bitcoin, which accounted for nearly 25% of Coinbase’s total trading volume in the first quarter, has fallen 55% year to date. Ethereum, which comprised another 21% of volume, is down nearly 70%.
Coinbase’s exchange, the crown jewel of its crypto empire, relies on trading volume to bring in money. As the world’s biggest cryptocurrencies tanked, so did the volume Coinbase saw on its venue. The number of visits to Coinbase’s exchange on desktops and apps fell 60% between May 2021 and May 2022, according to data from Similarweb, a digital intelligence platform that tracks traffic for millions of websites.
“Brian said the majority of our revenue comes from trading — no one’s really trading,” the former customer-service agent said.
To be sure, the entire crypto market was in crisis. The collapse of Terra, a decentralized stablecoin nominally pegged to another cryptocurrency, Luna, wiped out billions in market value this May. The day before Coinbase announced its own layoffs, crypto-lending platform Celsius announced the freeze of withdrawals from its platform. Meanwhile, layoffs swept through industry, impacting crypto powerhouses like Gemini, Crypto.com, and BlockFi.
Amid all the noise, Coinbase stock has fallen 78% this year. By mid-May, cracks began to show in its hiring plans. Just days after Coinbase released its quarterly report in which Armstrong discussed its hiring this year, the firm said it would enact a pause on new recruits. In early June, Coinbase announced it had rescinded offers the company had extended to hundreds of candidates.
For one former contract worker on Coinbase’s talent team, the company’s decision to rescind the job offers was the first sign that its growth strategy had gone awry.
At a last-minute meeting held with the heads of Coinbase’s talent division immediately following the rescinded offers, the contractor said, “We honestly thought we were getting laid off then and there.”
Some teams bore the brunt of layoffs
When the layoffs were announced this Tuesday, former employees were shocked at how they were conducted. For one, impacted employees’ access to Coinbase’s computer systems were shut off without warning first, at which point they received emails to their personal addresses informing them of their termination.
One of the former employees on Coinbase’s customer-experience team was in the middle of training new employees this week when they “woke up to a grey screen on my Mac,” adding they “slowly saw my Coinbase email disappear on my phone.”
In the blog post announcing the layoffs, Armstrong said the lack of notice given to impacted employees was intentional and driven by concerns over security.
“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 wrote.
Full-time employees were offered a minimum of 14 weeks of severance, nearly half of what the firm had previously offered some employees at the beginning of the year.
It’s not uncommon for companies pursuing waves of layoffs to pare back severance packages in order to cut costs, Alan Johnson, a compensation consultant at Johnson Associates, told Insider, adding that Coinbase’s current package is still competitive.
“Usually when firms go through cycles of layoffs, they are most generous at the beginning. You feel guilty, you’ve got more economics to give. So usually the longer it goes on, the skimpier it gets,” Johnson said.
Former employees cited many of the layoffs landed at non-revenue generating teams, with talent and customer support among those hit hardest. Teams focused on longer-term projects that had yet to develop products were also impacted, according to a former member of one of those teams.
The contractor said much of the talent team at Coinbase was laid off along with at least several recruiters.
As for Coinbase One, the customer-support team for that product has been “gutted,” whittled down to about 18 from more than 100, the former manager said.
Positions within the firm’s “experimental venture areas” would be among the first to go amid job cuts, Coinbase President and COO Emilie Choi told CNBC in the wake of the layoffs.
Meanwhile, development at Coinbase’s nascent NFT business, a Web3 marketplace for non-fungible tokens that entered beta April 20, has stalled, according to a former company program manager. Much of the NFT team has been laid off, they added.
“With our NFT launch, that was also pretty much a nothing burger, nothing transpired from that. So we just keep seeing failure after failure,” the program manager said.