Political | Process

In a letter to all employees, Chief Executive Brian Armstrong said “our employee costs are too high to effectively manage this uncertain market.”

“We appear to be entering a recession after a 10+ year economic boom,” Mr. Armstrong wrote. “A recession could lead to another crypto winter, and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly.”

The biggest cryptocurrency exchange in the U.S. has struggled to hang onto users this year as the frenzy in digital assets cooled and markets have been rocky. In May, Coinbase said it lost hundreds of millions of dollars in the first quarter as its trading fees dropped sharply.

The number of Coinbase’s transacting users also slid, and the company said it expected trading volumes and users to drop again in the second quarter.

Since the earnings report, things have gotten worse for cryptocurrency prices, Coinbase’s stock and markets in general. The price of bitcoin is down roughly two-thirds from its high over the past year. On Monday, the S&P 500 stock index entered a bear market as investors continued to unload risky assets while the Federal Reserve tries to tame the highest inflation in the U.S. in decades.

Investors expect the Fed to further raise interest rates, sapping appetite for assets seen as risky, like cryptocurrencies and technology stocks.

Shares of Coinbase traded at $50.60 on Tuesday, down 2.7%, after Coinbase posted the notice of layoffs as part of a Securities and Exchange Commission filing. When Coinbase went public in April of last year, the first trade of its stock was at $381.

Last week, Mr. Armstrong tweeted criticism of a petition by Coinbase employees to remove some executives, not including Mr. Armstrong, from the company because “the executive team has recently been making decisions that are not in the best interests of the Company, its employees, and its shareholders.”