By CCN: The markets may be moving into the green, but 30 Coinbase engineers will be seeing red tonight after they were reportedly laid off and the firm's Chicago office closed. It's a sure sign that despite positive sentiment returning, the crypto bear market is…
It’s a sure sign that despite positive sentiment returning, the crypto bear market is still determined to shrink a few more businesses before it’s over. It’s also a signal that mainstream financial players haven’t been ready to take the plunge into crypto.
A Coinbase spokesperson told CCN:
“Coinbase has consolidated our matching engine efforts into our San Francisco office. This means we are shutting down the matching engine efforts in the Chicago office. We assembled a talented team there and look to relocate a number of them to San Francisco. We’re incredibly grateful to the Chicago matching engine team for their contributions to Coinbase and have benefited from their unique perspectives and skill sets.”
“We are a culture that is committed to repeatable innovation, knowing full well that not everything we attempt will succeed. We continue to grow our institutional team and build on our foundation of products such as Coinbase Pro, Coinbase Custody, and our recently launched OTC trading desk.”
It also signals indecision by the San Francisco-based firm. The Chicago office was proudly announced in May 2018, but 11 months later it’s closed. What went wrong?
The aim had been for the Chicago team to tap into the city’s wealth of financial and market knowledge. Coinbase also sought to expand its services to include a “matching engine” – the system that brings together buy and sell orders – while luring high-frequency traders to the platform.
Coinbase makes its money from trading fees, after all. The higher the trade volume, the more it makes. But something wasn’t clicking, leading Coinbase to announce high-frequency trading was no longer a priority.
The 30 engineers were upgrading Coinbase’s back-end systems to cater to high-speed traders.
The firm expressed its regret for having to cut staff. Coinbase President and Chief Operating Officer Asiff Hirji, meanwhile, told the WSJ that a San Francisco-based team had managed to speed up Coinbase’s trading platform by a factor of 20 compared with late 2017, which begs the question why did they open a Chicago office in the first place?
They got greedy.
High-frequency trading firms reportedly account for around half the daily volume traded on the U.S. equities market, which represented a massive source of potential fees for Coinbase and an opportunity too good to miss.
After a rampant 2018 where it trebled its numbers to around 800 staff, Coinbase has had a pretty rotten 2019 so far.
It’s struggled to remain relevant while main rival (and some might argue more crypto-friendly exchange) Binance has taken huge steps forward.
It’s faced condemnation from the crypto community for its poor handling of the Neutrino affair and the hiring of ex-Hacking Team members who sold snooping technology to the governments of repressive regimes, a move that led to a fresh wave of the #DeleteCoinbase movement.
The announcement comes just days after the company revealed it’s expanding into 11 countries in Latin America and Asia, bringing its footprint to a total of 53 countries globally.
Binance has taken huge leaps forward with its native BNB token gaining massively in recent weeks, an expansion into the fiat-to-crypto markets in Jersey and Singapore, and the launch of a decentralized exchange. There’s a definite sense that Coinbase needs a win and to regain the momentum it had in late 2017 and 2018 to compete. Unfortunately, the job cuts and shuttering of the Chicago office could be just the beginning.
Last modified: January 10, 2020 3:05 PM UTC