Coinbase’s Rapid Rise Left It Exposed in Crypto’s Collapse

Brian Armstrong,

an early devotee of blockchain generation, constructed the cryptocurrency trade

Coinbase Global Inc.

COIN 4.67%

to be giant.

He employed staff through the loads, driven into new markets and scaled up the collection of electronic tokens to be had at the platform. Coinbase turned into the most important crypto trade in America and went public in spring 2021 with a marketplace price of just about $86 billion.

This 12 months’s crypto cave in has dropped that price to more or less $21 billion. And it has left Mr. Armstrong to combat with a sprawling trade now confronted with top bills, dwindling money and, extra lately, a problem from federal regulators.

“Coinbase expanded wildly sooner than it were given its sea legs,” mentioned

Adam Dell,

leader government of Domain Money, an app that allows traders to shop for investments together with crypto and is a Coinbase competitor. “They grew so rapid that it were given clear of them.”

Almost each and every crypto corporate is suffering, with bitcoin costs off greater than 50% this 12 months, and Coinbase’s struggles replicate the ones of many others within the business. If crypto costs upward push, Coinbase is prone to emerge a winner. The company’s inventory rose sharply this week, a possible signal of investor religion in its long run. But after its fast enlargement, Coinbase, one in every of crypto’s maximum necessary gamers, faces distinctive demanding situations within the downturn.

Coinbase raced so as to add staff even after the crypto marketplace weakened this 12 months, and on occasion sooner than even deciding at the new hires’ duties, consistent with former staff. It driven into some companies that experience floundered and followed unorthodox control practices that resulted in pushback amongst some at the group of workers.

Great Expectations

Coinbase ramped up staffing at the same time as buying and selling volumes fluctuated. Now volumes are 1 / 4 in their 2021 height, and the corporate has made group of workers cuts.

Trading volumes* for main U.S. crypto

exchanges, as share of 2021 height

Coinbase’s full-time staff

Real News Hub

Trading volumes* for main U.S. crypto

exchanges, as share of 2021 height

Coinbase’s full-time staff

Real News Hub

Coinbase’s full-time staff

Trading volumes* for main U.S. crypto

exchanges, as share of 2021 height

Real News Hub

Trading volumes* for main U.S. crypto

exchanges, as share of 2021 height

Coinbase’s full-time staff

Real News Hub

Trading volumes* for main U.S. crypto

exchanges, as share of 2021 height

Coinbase’s full-time staff

Coinbase now unearths itself at odds with the Securities and Exchange Commission, which has taken the placement that a number of crypto cash traded on Coinbase’s platform are securities. Coinbase, which isn’t approved to function as a securities trade, denies they’re. But a possible lawsuit from the securities regulator may result in a delisting of a few cash and larger hesitation about including new ones someday.

Coinbase is slicing again, together with a deep group of workers relief in June and value cuts that come with getting rid of loose worker lunches.

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Employees at Coinbase workplaces in San Francisco in December 2017.


Michael Short/Bloomberg News

A Coinbase spokesman mentioned, “Building an organization that may disrupt as many industries as Coinbase used to be at all times going to be formidable. We’ll outline our luck over a long time.” Mr. Armstrong, the executive government and co-founder, declined to be interviewed.

Mr. Armstrong, who studied economics and pc science at Houston’s Rice University, used to be working an e-learning startup in 2010 when he learn the unique bitcoin white paper through the pseudonymous

Satoshi Nakamoto.

He quickly turned into enamored of the brand new concepts of blockchain generation and a electronic model of money.

He began Coinbase in 2012, seizing on an early downside: There used to be no safe and available means for other people to retailer their electronic forex.

When consumers requested to business bitcoin, no longer simply retailer it, Coinbase turned into an trade.

In overdue 2013, Coinbase’s handful of staff labored in a cramped condominium on Bluxome Street in San Francisco, the place staffers took calls in the toilet or in closets.

Adam Draper,

an early investor, mentioned the corporate’s first rent used to be a customer-support specialist, an indication of Mr. Armstrong’s center of attention on making it simple for traders to guess on crypto.

“He sought after Coinbase to be the relied on emblem for regulators, shoppers and traders,” Mr. Draper mentioned.

By 2017, Coinbase used to be in a right kind administrative center with greater than 150 staffers. Co-founder

Fred Ehrsam

departed that 12 months, leaving Mr. Armstrong on the helm.

Mr. Armstrong would paintings overdue into the evening, then come to the administrative center at 10 a.m. or later. Much of his center of attention used to be on bettering Coinbase’s generation, as he attended product conferences and weighed in on new choices, former executives recall.

Shy through nature, Mr. Armstrong on occasion struggled to keep in touch with some staffers, together with the ones out of doors of the generation box, former executives mentioned. After

Brian Brooks

used to be employed as leader criminal officer in 2018, he had weekly check-in conferences with Mr. Armstrong in a convention room. They sat throughout from every different and typed feedback back-and-forth on Google doctors, spending just about half-hour with out uttering a phrase, an individual conversant in the conferences mentioned. Later, as Mr. Armstrong turned into extra pleased with Mr. Brooks, he started talking with him of their conferences, the individual mentioned.

Asked about that, a Coinbase spokesman declined to remark.

Mr. Armstrong informed colleagues he used to be reluctant to talk at business occasions, some say. Two former staffers described him as “Vulcan”-like, relating to the “Star Trek” humanoids that display little emotion, and mentioned he looked to be uncomfortable reprimanding underlings. A former government recounted how a senior government fell asleep throughout an organization retreat, after a chain of late-night paintings classes, however Mr. Armstrong wouldn’t wake the manager, sudden no less than one member of the workforce. The Coinbase spokesman declined to remark.

After hiring extra executives, Mr. Armstrong delegated some duties and most well-liked to spend time together with his headphones on, coding and dealing to resolve technical issues, one former government mentioned.

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Mr. Armstrong, co-founder and CEO of Coinbase.


Nikki Ritcher for the Wall Street Journal

He can be a supportive boss. In 2017, when Coinbase indexed bitcoin money, a by-product from the bitcoin code, consumer call for used to be so top Coinbase needed to freeze buying and selling. As tech staffers raced to mend the issue and mollify unsatisfied consumers, Mr. Armstrong introduced encouragement, assuring a tech worker the CEO stood in the back of him.

Mr. Armstrong and different executives moved quickly to increase their workforce to stay alongside of rising passion in cryptocurrencies, hiring other people from main tech and fiscal companies.

Within the corporate, in accordance to a few who labored there, staff who won energy continuously had been the ones taken with recruiting. Coinbase on occasion set competitive hiring targets with no transparent working out of what new staff can be doing, consistent with those other people, who mentioned that every now and then, quite a lot of units of staff tackled an identical tasks.

Staffers continuously spent a lot of the day in conferences, on occasion as many as 15 in an afternoon, consistent with former staff. One mentioned that productiveness used to be hindered through interior debates, festival and grievance.

Employees launching new merchandise on occasion anxious about “blockers”—a time period for others at the group of workers who attempted to impede new concepts.

Coinbase executives say they notice they behavior too many conferences and feature begun taking steps to cut back them. One government mentioned the corporate might take longer than others to make selections as a result of it’s considerate about new merchandise and is extra taken with safety and compliance than others within the crypto global.

In some other quirk of the Coinbase tradition, senior executives, together with

Emilie Choi,

president and leader working officer, ceaselessly scrutinized staff’ ConnectedIn pages, on occasion ordering staffers to regulate language on them, consistent with former staff. Ms. Choi mentioned she reads the ConnectedIn listings to look if staff exaggerate their duties, a part of an effort to construct a tradition of duty.

While Coinbase raced so as to add staff and draw up growth plans, it on occasion used to be sluggish executing them. Coinbase mentioned final October it might release a market for nonfungible tokens, or NFTs, and shifted some most sensible engineers to the challenge. It didn’t introduce a beta model till April, and the NFT market has performed simply $4.2 million in transactions, consistent with Dune Analytics.

Coinbase executives disputed the figures however didn’t supply different knowledge at the NFT platform. They mentioned it’s too early to depend out new projects, together with the NFT market.

Staffers have previously debated making a Singapore-based crypto trade to provide leverage and different buying and selling functions to non-U.S. investors, however by no means carried out the method, a former government mentioned. The Coinbase spokesman wouldn’t remark.

This April, Coinbase executives traveled to India to announce the release of operations there. Within days, Coinbase limited local-currency transfers after grievance from an Indian regulator. It hopes to renew the transfers quickly.

Sixteen months in the past, when Coinbase used to be going public, keen traders embraced Mr. Armstrong’s imaginative and prescient of bringing bitcoin to the loads. At Coinbase’s price after the IPO, Mr. Armstrong’s 20% stake used to be value about $17 billion. Nine months later, he purchased a $133 million Los Angeles property, one of the vital priciest house gross sales ever within the L.A. house, consistent with other people conversant in the deal.

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The massive video display at the Nasdaq inventory trade in Times Square in New York, embellished for the debut of the Coinbase list on April 14, 2021.


Richard B. Levine/Zuma Press

Coinbase greater than doubled its group of workers final 12 months. Though it had a historical past of including new tokens to its platform at a slower tempo than competition comparable to Binance Holdings Ltd. and FTX, Coinbase speeded up the list tempo within the first part of final 12 months.

Mr. Armstrong mentioned a 12 months in the past that Coinbase would in the end be offering “each and every respected cryptocurrency to our customers (learn: no longer a rip-off, or unlawful).” By the tip of 2021, Coinbase supported 172 cash for custody and 139 for buying and selling.

The corporate persevered including group of workers this 12 months in spite of the weak spot in crypto values. It reached a headcount of 6,000 this summer time, when put next with about 300 staff at rival FTX.

As electronic cash’ values slid this 12 months, buying and selling volumes shrank and Coinbase stocks fell. An worker at one level circulated a petition calling for the ouster of 3 most sensible executives, no longer together with Mr. Armstrong.

The CEO replied on


calling the petition “truly dumb on more than one ranges” and writing: “If you don’t have any self assurance within the professionals or CEO of an organization then why are you running at that corporate? Quit and discover a corporate to paintings at that you simply imagine in!”

In June, Coinbase laid off 1,100 staff, 18% of its team of workers. The transfer stuck many through wonder. Some contributors of what staff have dubbed “the Coinbase 18” attempted logging into their paintings computer systems however couldn’t, and realized they’d misplaced their jobs best after finding an electronic mail on a non-public tool. Some informed pals they had been distraught at how the inside track used to be delivered.

A Coinbase spokesman mentioned deciding to cut back the team of workers used to be tough however the corporate took pains to look that the transition used to be as clean as conceivable, giving severance pay and serving to other people in finding new jobs.

Late final month, federal prosecutors filed an insider-trading case in opposition to a former Coinbase supervisor, who denied the costs, and on the identical time, the Securities and Exchange Commission asserted that seven crypto property traded at the Coinbase platform qualify as securities. While referred to as an trade, Coinbase isn’t regulated as one, the best way New York Stock Exchange and Nasdaq are.

Coinbase mentioned it doesn’t business securities, and criticized the SEC for failing to interact with digital-asset firms or adapt the company’s laws to cryptocurrency markets. Coinbase’s trade type is in large part depending on earnings from retail buying and selling, so a resolution that the seven crypto property are securities may upend a part of that type.

If a courtroom consents with the SEC that one of the crucial electronic tokens are securities, Coinbase would most probably have to forestall buying and selling them on its trade. Coinbase itself may probably face legal responsibility, comparable to fines, if the SEC ultimately sues Coinbase over its choice to record the property.

Either step may have a chilling impact on Coinbase’s long run list selections, whilst its in a foreign country competition would have fewer constraints on their enlargement. Binance.US, the U.S. arm of Binance Holdings, previous this week delisted one of the vital alleged securities.

A Coinbase spokesman mentioned that during 2018 the corporate received the licenses vital to function a securities buying and selling platform, despite the fact that it didn’t do the paintings vital to make use of them. Coinbase may take the stairs to turn out to be an authorized securities trade if that is deemed required, the spokesman mentioned.


What are Coinbase’s possibilities within the present setting for crypto? Join the dialog underneath.

More than 90% of Coinbase’s earnings comes from particular person traders. In a possible aggressive risk, Fidelity Investments moved in April to let other people cling cryptocurrencies in 401(okay) accounts, which Fidelity administers for hundreds of employers. Coinbase executives mentioned the retail crypto marketplace is big sufficient that the corporate received’t be threatened through new entrants.

They added that Coinbase is rolling out electronic wallets and different merchandise to lend a hand traders get entry to so-called Web 3.0, relating to a brand new, decentralized iteration of the web reliant on blockchains.

Ms. Choi, Coinbase’s president and COO, mentioned the corporate has been thru a number of up-and-down cycles. “We’re making an investment within the core trade and someday,” she mentioned. “We welcome festival.”

Write to Gregory Zuckerman at and Caitlin Ostroff at

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