Coinbase CEO Brian Armstrong fears a recession according to his email to employees.

Coinbase (NASDAQ: COIN) on Tuesday informed employees by email that it would cut 18% of jobs, which would amount to roughly 1,100 people considering it employs about 5,000 people. The company is the largest US crypto exchange and its share price has slid sharply since its IPO last year. Year to date, the stock has lost 79%, and since November, the crypto market has also entered a vicious downturn. (CNBC).

Coinbase message

As of writing bitcoin is trading at $22,274, and is down 68% from its all time high of $68,990 hit in 2021.

On Monday, the overall crypto market capitalization fell below $1 trillion on Monday for the first time since January 2021.

In his message Armstrong said: “We appear to be entering a recession after a 10+ year economic boom. 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. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.”

The CEO also said that clearly the company had over-hired during 2021, especially since it was in the early innings of the bull run and witnessing an explosion in the adoption of crypto products at the time.

“Our team has grown very quickly (>4x in the past 18 months) and our employee costs are too high to effectively manage this uncertain market,” Armstrong wrote. “The actions we are taking today will allow us to more confidently manage through this period even if it is severely prolonged.”

Earlier today, news broke of lay-offs at BlockFi and Crypto.com on much the same considerations.

JPMorgan downgrades Coinbase

In a note to clients Tuesday, J.P. Morgan’s Kenneth Worthington moved his call on the Coinbase stock from Overweight to Neutral in view of the steep fall in crypto prices.

“While we continue to be believers in the cryptocurrency markets and blockchain technology, the extreme decline in the price of cryptocurrency markets in 2Q22 combined with Coinbase’s ramp in investment would appear to not only make it challenging for it to generate a profit in the near future but also to meet its annual loss cap of $500mn of annual EBITDA.”

Trouble at crypto players: Margin call on Microstrategy?

The sentiment in the crypto market has been roiled by events such as the collapse of the TerraUSD stablecoin in May, and this week, a shock announcement by crypto lender Celsius that barred all withdrawals, Swap, and transfers.

Meanwhile, another such event may be brewing. According to Bloomberg, Microstrategy (NASDAQ: MSTR), a company which has invested heavily in bitcoin including with borrowed funds, may face a margin call on a $205 million loan it took in March, given the slide in bitcoin’s price.

Related Story: BlockFi And Crypto.com Forced To Cut Jobs Amidst Crypto Market Crash