Finance

Industrial production rose mildly by 0.7% in May from a year ago, versus an expected 0.7% drop, according to analysts polled by Reuters. In April, industrial production unexpectedly fell, down by 2.9% year-on-year.
Fixed asset investment for the January to May period rose by 6.2%, topping expectations of 6% growth.
Still, China’s National Bureau of Statistics warned: “We must be aware that the international environment is to be even more complicated and grim, and the domestic economy is still facing difficulties and challenges for recovery.”

BEIJING — China released economic data for May that topped muted expectations for a month hampered by Covid controls.Industrial production rose mildly by 0.7% in May from a year ago, versus an expected 0.7% drop, according to analysts polled by Reuters. In April, industrial production unexpectedly fell, down by 2.9% year-on-year.Retail sales fell less than expected, down by 6.7% in May from a year ago. Retail sales were estimated to have declined by 7.1% in May from a year ago, according to the Reuters poll. In April, retail sales fell by 11.1% from a year ago.Fixed asset investment for the January to May period rose by 6.2%, topping expectations of 6% growth.
China’s National Bureau of Statistics said in a statement that the economy “showed a good momentum of recovery” in May, “with negative effects from Covid-19 pandemic gradually overcome and major indicators improved marginally.”

“However, we must be aware that the international environment is to be even more complicated and grim, and the domestic economy is still facing difficulties and challenges for recovery,” the bureau said.

New energy vehicles, which include hybrid and battery-powered cars, have seen sales surge in China despite a slump in the overall car market. Pictured here is an unnamed new energy vehicle factory in Jiangsu province on June 13, 2022.
Wan Shanchao | Visual China Group | Getty Images

China’s exports accelerated in May to a better-than-expected 16.9% increase from a year ago in U.S. dollar terms. Imports also rose by a greater-than-expected 4.1%.
Shanghai and Beijing, China’s two largest cities by gross domestic product, have both had to reinstate tighter Covid controls this month after persistent spikes in Covid cases.
Shanghai had locked down in April and May, with only some major businesses operating. The city began to fully reopen on June 1.

Read more about China from CNBC Pro

For about a month in May, Beijing had told people in its biggest business district to work from home, while restaurants across the capital could only operate on a takeout or delivery basis. Most restaurants in Beijing were allowed to resume in-store dining in early June and employees could return to work, but schools have delayed resuming in-person classes.

The uncertainty, especially about future income, has weighed on consumer spending. The unemployment rate in China’s 31 largest cities surpassed 2020 highs to reach 6.7% in April — the highest on record going back to 2018. That rate rose further in May to 6.9%, while the overall unemployment rate in cities ticked lower to 5.9%.
The unemployment rate for young people aged 16 to 24 rose further to 18.4% in May, up from 18.2% in April.
“I think as the restrictions are being eased and we have monetary policy support going forward, the unemployment rate should come down a little considering we’re well above the government target,” Francoise Huang, senior economist at Allianz Trade, said in a phone interview last week.
“At the moment my scenario is that we should see some recovery in the second half of the year,” she said. “It’s not [a] V-shaped rebound, quick and strong rebound, or post-Covid recovery like we had seen in 2020, because the policy easing is not that strong and external demand is not that strong.”

WATCH LIVEWATCH IN THE APP More

Luxury brands have slashed expectations for their China business this year after the country’s latest Covid lockdowns, according to an Oliver Wyman survey shared exclusively with CNBC.
Premium consumer and luxury goods brands now only expect 3% year-on-year growth in their mainland China business this year, down sharply from an 18% surge they forecast a few months ago, the report said.
“There is a huge doubt about whether the consumer confidence [can] recover quickly, as in 2020 and 2021,” said Oliver Wyman principal Kenneth Chow, citing the firm’s interviews with executives.

China’s retail sales plunged 11.1% in April from a year ago as Covid controls kept many people at home and malls closed. Pictured here is a luxury store in Shanghai on June 4, 2022, just a few days after the city officially began to reopen.
Hugo Hu | Getty Images News | Getty Images

BEIJING — Luxury brands have slashed expectations for their China business this year after the country’s latest Covid lockdowns, according to an Oliver Wyman survey shared exclusively with CNBC.
Forecasted growth for luxury and premium consumer brands was cut by 15 percentage points, and down nearly 25 percentage points for luxury brands alone, according to survey results released Wednesday.

Premium and luxury goods businesses now expect only 3% year-on-year growth in their mainland China business this year, down sharply from an 18% surge they forecast a few months ago, the report said. That’s based on a weighted average of the survey results.
Oliver Wyman said its survey of executives in May covered more than 30 of the consulting firm’s clients across premium consumer and luxury goods, representing more than $50 billion in retail sales.

Uncertain future

Shanghai, the city with the largest gross domestic product in China and a hub for foreign business, faced the brunt of China’s Covid outbreak this spring — the country’s worst since the initial shock of the pandemic in early 2020. The city ordered people to stay home and most businesses to shut for two months, before attempting to reopen on June 1.
“There is still a very high uncertainty of what will be the future Covid [measures] in China,” Kenneth Chow, principal at Oliver Wyman, said in a phone interview this week.

“There is a huge doubt about whether the consumer confidence [can] recover quickly, as in 2020 and 2021,” he said, citing the firm’s interviews with executives.

China’s retail sales plunged by 11.1% in April from a year ago, following a 3.3% increase during the first three months of the year. Consumer spending in China never fully recovered from the initial phase of the pandemic, and as Covid drags into its third year, people are increasingly worried about future income.
The unemployment rate in China’s 31 largest cities surpassed 2020 highs to reach 6.7% in April — the highest since records began in 2018.
“It seems that this time around, the affluent Gen Z [age 25 or younger] may react differently, especially since a lack of job security may be something that they have to deal with for the very first time,” the report said. “Another common view from our interviewees is that the longer the restrictions, the longer the upcoming U-trough will last.”
Even in areas not locked down, client anecdotes said in-store traffic fell by more than 50%, and the percentage of those visitors actually making a purchase was up to 30% lower, according to the Oliver Wyman report.
China has maintained a strict “dynamic zero-Covid” policy that uses travel restrictions and swift lockdowns to try to control the virus. While the strategy helped the country quickly return to growth in 2020, the higher transmissibility of this year’s omicron variant has made the virus harder to control.
Looking ahead to next year, survey respondents were more cautious about future growth, with only 12% — down from 40% previously — expecting their China business to grow by more than 20%.
The brands on average now expect 11% growth next year in their mainland China business, with only 6% not planning for growth, the report said.

Bright spots

Many of the luxury and premium consumer brands surveyed were optimistic about growth opportunities from domestic travel and e-commerce, Chow said. He said once domestic travel is allowed to pick up, Hainan tends to benefit.
The tropical Chinese island has become a luxury goods shopping hub since most Chinese travelers cannot go overseas.
He added that many luxury brands were using e-commerce to reach smaller Chinese cities, while brands in a lower range of the market were exploring new store openings. But “when speaking with some of our clients, the Covid lockdown in Shanghai and some other cities have been their primary concern, rather than store expansion,” Chow said.

Read more about China from CNBC Pro

Looking longer-term, high levels of Chinese consumer saving has historically been a good predictor of future spending, the report said.
In the first quarter, Chinese household inclinations to save reached the highest since 2002, according to a survey by the People’s Bank of China.
“Once consumer confidence is resumed and also the Covid lockdown measures have been relieved, there will be a much better spending level to be unlocked,” Chow said. But “the question still remains on when the Covid measures will be relieved.”
Oliver Wyman’s survey found that the most optimistic expect China to make a full recovery as early as July, while pessimists don’t expect a return to normal until next year. “The neutral view puts an end to the restrictive policies to occur around October this year,” the report said.

WATCH LIVEWATCH IN THE APP More

Monday – Friday, 5:00 – 6:00 PM ET

Fast Money Podcast
Full Episodes

Until inflation peaks and the Federal Reserve stops hiking rates, market forecaster Jim Bianco warns Wall Street is on a one way trip to misery.
“The Fed only has one tool to bring in inflation and that is they have to slow demand,” the Bianco Research president told CNBC “Fast Money” on Tuesday. “We may not like what’s happening, but over in the Eccles building in Washington, I don’t think they’re too upset with what they’ve seen in the stock market for the last few weeks.”

The S&P 500 dropped for the fifth day in a row and tripped deeper into a bear market on Tuesday. The index is now off 23% from its all-time high hit on Jan. 4. The Nasdaq is off 33% and the Dow 18% from their respective record highs.
“We’re in a bad news is good news scenario because you’ve got 390,000 jobs in May,” said Bianco. “They [the Fed] feel like they can make the stock market miserable without creating unemployment.”
Meanwhile, the benchmark 10-year Treasury Note yield hit its highest level since April 2011. It’s now around 3.48%, up 17% over just the past week.

‘Complete mess right now’

“The bond market, and I’ll use a very technical term, it’s a complete mess right now,” he said. “The losses that you’ve seen in the bond market year-to-date are the greatest ever. This is shaping up to be the worst year in bond market history. The mortgage-backed market is no better. Liquidity is terrible.”
Bianco has been bracing for an inflation comeback for two years. On CNBC’s “Trading Nation” in December 2020, he warned inflation would surge to highs not seen in a generation.

“You’ve got quantitative tightening coming. The biggest buyer of bonds is leaving. And, that’s the Federal Reserve,” said Bianco. “You’ve got them intending on being very hawkish in raising rates.”
Bianco expects the Fed will hike rates by 75 basis points on Wednesday, which falls in line with Wall Street estimates. He’s also forecasting another 75 basis point hike at the next meeting in July.
“You could raise rates enough and you could butcher the economy and you can have demand fall off a cliff and you can have inflation go down. Now, that’s not the way you or I want it to be done,” said Bianco. “There’s a high degree of chance that they’re going to wind up going too far and making a bigger mess of this.”
He contends the Fed needs to see serious damage to the economy to back off its tightening policy. With inflation affecting every corner of the economy, he warns virtually every financial asset is vulnerable to sharp losses. According to Bianco, the odds are against a soft or even a softish landing.
His exception is commodities, which are positioned to beat inflation. However, Bianco warns there are serious risks there, too.
“You’re not there in demand destruction yet. And so, I think that until you do, commodities will continue to go higher,” he said. “But the caveat I would give people about commodities is they’ve got crypto levels of volatility.”
For those with a low tolerance for risks, Bianco believes government-insured money market accounts should start looking more attractive. Based on a 75 basis points hike, he sees them jumping 1.5% within two weeks. The current national average rate is 0.08% on a money market account, according to Bankrate.com’s latest weekly survey of institutions.
It would hardly keep up with inflation. But Bianco sees few alternatives for investors.
“Everything is a one way street in the wrong direction right now,” Bianco said.
Disclaimer

WATCH LIVEWATCH IN THE APP More

Stock futures rose slightly in overnight trading Tuesday as investors anxiously awaited the Federal Reserve’s aggressive action to tame surging inflation.
Futures on the Dow Jones Industrial Average gained 70 points. S&P 500 futures edged up 0.3% and Nasdaq 100 futures rose 0.4%.

The S&P 500 suffered a five-day losing streak on Tuesday, dipping deeper into bear market territory. The equity benchmark has fallen more than 4% this week already and is now off over 22% from its all-time time hit in early January. The blue-chip Dow slid about 150 points Tuesday, also falling for a fifth straight day Tuesday. The Nasdaq Composite ended Tuesday slightly higher.
The rate-setting Federal Open Market Committee will conclude its two-day meeting on Wednesday. The market is betting on a 94% chance of a 75-basis-point rate hike, the biggest increase since 1994, according to the CME Group’s FedWatch tool. (1 basis point equals 0.01%)
The shift to price in a larger-than-usual rate hike came after headlines that Fed officials were contemplating such a move following a surprisingly hot inflation reading as well as worsening economic outlook.
“The change in the headline from 50 basis points to 75 basis points reflects a stark reality but it also reflects the Fed’s determination to underscore its commitment to its mandate to maintain price stability,” said Quincy Krosby, chief equity strategist at LPL Financial. “It’s neither a trial balloon nor a lead balloon — it’s reality.”
Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. ET following the central bank’s policy decision. Investors will be monitoring his language and tone about the Fed’s tightening path forward. The central bank will also release its outlook for its benchmark rate, inflation and GDP.

Treasury yields have jumped dramatically this week in anticipation of the big rate hike. The two-year rate, most sensitive to changes in monetary policy, surged 40 basis points this week alone to hit its highest level since 2007. The benchmark 10-year yield popped more than 30 basis points to top 3.48%, a high not seen since April 2011.
Some notable investors believe the central bank can regain credibility by acting aggressively to show its seriousness in combating inflation.
The Fed “has allowed inflation to get out of control. Equity and credit markets have therefore lost confidence in the Fed,” wrote Pershing Square’s Bill Ackman in a tweet Tuesday. “Market confidence can be restored if the Fed takes aggressive action with 75 bps tomorrow and in July” and makes a commitment to aggressive increases until inflation “has been tamed.”

WATCH LIVEWATCH IN THE APP More

Crypto lending firm Celsius on Monday paused all account withdrawals, sparking fears that it may be about to go bust.
Investors are scared other parts of the crypto market could get floored if Celsius collapses.
Many analysts agree any spillover effects from the debacle are likely to be limited to crypto.

Cryptocurrencies have taken a tumble in 2022.
Chesnot | Getty Images

A liquidity crisis at cryptocurrency lending firm Celsius has investors worried about a broader contagion that could bring down other major players in the market.
Celsius recently moved to pause all account withdrawals, sparking fears that it may be about to go bust. The company lends out clients’ funds similar to a bank — but without the strict insurance requirements imposed on traditional lenders.

Bitcoin sank below $21,000 on Tuesday, extending sharp declines from the previous day and sinking deeper into 18-month lows. The total value of all digital tokens combined also dipped below $1 trillion for the first time since early 2021, according to CoinMarketCap data.

Crypto investors fear the possible collapse of Celsius may lead to even more pain for a market that was already on shaky ground after the demise of $60 billion stablecoin venture Terra. Celsius was an investor in Terra, but says it had “minimal” exposure to the project.
Celsius did not return multiple CNBC requests for comment.
“In the medium term, everyone is really bracing for more downside,” said Mikkel Morch, executive director of crypto hedge fund ARK36.

Read more about tech and crypto from CNBC Pro

“Bear markets have a way of exposing previously hidden weaknesses and overleveraged projects so it is possible that we see events like last month’s unwinding of the Terra ecosystem repeat.”

Monsur Hussain, senior director of financial institutions at Fitch Ratings, said a liquidation of Celsius’ assets would “further rock the valuation of cryptoassets, leading to a wider round of contagion within the crypto sphere.”
Celsius has a large presence in the so-called decentralized finance space, which aims to recreate traditional financial products like loans without the involvement of intermediaries like banks.
Celsius owns numerous popular assets in the DeFi world, including staked ether, a version of the ether cryptocurrency that promises users rewards on their deposits.
“If it goes into full liquidation mode, then it will have to close out these positions,” said Omid Malekan, an adjunct professor at Columbia Business School.
USDD, a so-called stablecoin that’s meant to always be worth $1, fell as low as 97 cents Monday, echoing the woes of Terra’s UST stablecoin last month. Justin Sun, the coin’s creator, accused unnamed investors of “shorting” the token and pledged $2 billion in financing to shore up its dollar peg.

Elsewhere, rival crypto lenders Nexo and BlockFi sought to downplay concerns over the health of their operations after Celsius announced its decision to halt withdrawals.
Nexo said it had a “solid liquidity and equity position,” and had even offered to acquire some of Celsius’ loan portfolio — a proposal it says the company “refused.” BlockFi, meanwhile, said all its services “continue to operate normally” and that it has “zero exposure” to staked ether.
That doesn’t mean it hasn’t been impacted by the downturn, though — BlockFi this month laid off about 20% of its workforce in response to a “dramatic shift in macroeconomic conditions.”
Celsius’ liquidity crunch has raised worries of possible knock-on effects in other financial markets.
CDPQ, the manager of Canada’s second-biggest pension fund, co-led an equity investment in Celsius earlier this year. In a statement Monday, the company said it is “closely monitoring the situation.”
Many analysts agree any spillover effects from the Celsius debacle are likely to be limited to crypto. “The biggest risk of contagion is within crypto markets themselves,” Malekan said.
Hussain of Fitch said the sell-off in crypto prices reflected a “shrinking of the entire crypto market,” adding “contagion with the broader centralised financial system will be limited.”

WATCH LIVEWATCH IN THE APP More

Check out the companies making headlines in midday trading.
Continental Resources — Shares soared 15% after the shale company announced an all-cash buyout proposal from the family trust of billionaire founder Harold Hamm. Continental Resources said it’s yet to review the offer that would take the company private in a $25.4 billion deal.

FedEx — Shares of the parcel delivery firm jumped 14.4% after FedEx raised its quarterly dividend by more than 50% to $1.15 per share. FedEx also said it added two directors to its board as part of an agreement with hedge fund D.E. Shaw.
Oracle — The database software company saw its shares pop more than 10% after reporting fiscal fourth-quarter results that exceeded analysts’ estimates on the top and bottom lines. CEO Safra Catz said the company saw a “major increase in demand” for cloud infrastructure.
Occidental Petroleum, Phillips 66, Marathon Oil — Shares of oil and gas companies jumped on the back of rising oil prices on Tuesday. Shares of Occidental Petroleum spiked 3.8%, Phillips 66 jumped 2.7% and Marathon Oil rose more than 1%.
National Vision — Shares jumped 5% following news that the optical retailer will enter the S&P SmallCap 600 index this week. National Vision will replace Renewable Energy Group, which was acquired by Chevron.
Twitter — Shares added less than 1% following reports that Elon Musk will address Twitter employees during an all-hands meeting this week. Musk has walked back and forth on an offer to buy the social media company for $44 billion.

C.H. Robinson Worldwide — Shares jumped 6% following a Reuters report that said C.H. Robinson Worldwide’s international cargo transport business has drawn interest from Danish transport company DSV A/S. An acquisition of C.H. Robinson’s global forwarding business could reportedly fetch $9 billion.
Nokia — The U.S. traded shares of the Finnish communications network company rose 2.2% following an upgrade to buy from neutral at Citi. The investment firm said in a note that Nokia has stopped losing market share to competitors and has conservative targets for its margins.
Coty — Shares spiked more than 5% after the cosmetics company reaffirmed its current-quarter and full-year outlook.
— CNBC’s Yun Li and Jesse Pound contributed reporting.

WATCH LIVEWATCH IN THE APP More

American economists are no longer hawks or doves, but optimists or pessimists. With annual inflation running at 8.6% in May, everyone agrees the Federal Reserve needs to raise interest rates sharply. On June 13th traders began betting on a rate rise of 0.75 percentage points at the Fed’s meeting ending on June 15th, up from 0.5 points, as worries about the scale of the task facing the central bank spread across financial markets. The disagreement now is not over whether the Fed must fight inflation but how painful the consequences will be. Pessimists point to the long history of bouts of monetary-policy tightening being followed by recessions. Optimists say the Fed can bring inflation down to its 2% target merely by slowing economic growth.The Fed is in the optimists’ camp. In a recent speech Christopher Waller, one of the central bank’s rate-setters, spelt out the argument. It hinges on America’s hot labour market. There were almost twice as many job openings as there were unemployed workers in April, with the ratio near a record high reached in March. And wages are more than 5% higher than a year ago. (Such is the heat that McDonalds is cutting workers from the kitchen, by shrinking its menus.) Although the headline measure of wage growth is slowing a little, the obvious imbalance between the demand for workers and their supply means the Fed cannot count on further cooling. Without it, prices are likely to continue rising fast, too, as workers spend their bumper incomes and firms pass on their costs.A pessimist would see plentiful job openings as a sign of how out of whack the labour market has become on the Fed’s watch. The central bank sees them as evidence that it can cool things down without turfing anyone out of a job. Fewer vacancies, and therefore less competition for workers, might lower wage growth and inflation without raising unemployment. This idea motivates the belief of the Fed’s chairman, Jerome Powell, that the economy faces only “some pain” from disinflation—akin to suffering from the side-effects of an inoculation, rather than the disease itself.The Fed’s argument can be cast as one about the slope of the “Beveridge curve”, which traces the relationship between the vacancy and unemployment rates (see chart). It is named after William Beveridge, a British economist who in 1944 established the importance of vacancies in determining unemployment. The curve is a mysterious beast. It often shifts outwards during recessions, and did so after the global financial crisis, such that a higher level of vacancies were needed to support any given level of unemployment. Economists speculated that it had become harder to match workers to jobs, perhaps because they were in the wrong place or had the wrong skills.Since covid-19 struck, the Beveridge curve has moved outwards more dramatically still, perhaps reflecting the rise of home working, the decline of city centres and changing patterns of consumer spending. Its recent shape suggests that were vacancies to return to their 2019 level, when the labour market was arguably last in balance, the unemployment rate would rise from 3.6% today to more than 6%. That is hard to imagine without an accompanying economic contraction. A rise of just 0.5 percentage points in the three-month average unemployment rate, from its low over the preceding 12 months, is an indicator of recession. Every time it has occurred since 1950, it has either been accompanied by, or shortly followed by, a downturn—a principle known as the “Sahm rule” (named for Claudia Sahm, an American economist). Mr Waller, however, thinks that the shape of the Beveridge curve will change again as vacancies fall. The curve’s outward shift during the pandemic reflects firing as well as hiring: lots of workers lost their jobs early on. Layoffs increase the unemployment rate for a given level of vacancies and push out the Beveridge curve. Today, though, few workers are being sacked. Perhaps the Fed can manage to cool the economy, and as a result lower the vacancy rate, but without increasing layoffs. In this scenario the curve would be steeper on the way down than it was on the way up. Reducing the vacancy rate to its 2019 level while holding layoffs constant would imply only a modest rise in unemployment, to around 4.5%. Though that would still trigger the Sahm rule, “the past is not always prescriptive of the future,” says Mr Waller, noting that vacancies have never before been so high.The perils of positive thinkingThe Fed’s maths are sound. Yet its argument looks like the latest instance of over-optimism among monetary policymakers, who have downplayed the extent of the inflation scare and underestimated the action needed to fight it. Why would tighter policy shrink vacancies but not increase layoffs? Higher interest rates reduce consumer spending and investment, which might cause the weakest firms to shrink or even shut down. Mr Waller says that “outside of recessions, layoffs don’t change much”. Yet recession is precisely the outcome that pessimists fear will follow from higher rates. The historical record backs up that worry—and provides little support for the Fed’s argument. Research by Alex Domash and Larry Summers, both of Harvard University and firmly in the pessimists’ camp, finds that there has never been an instance in which the vacancy rate has fallen substantially without unemployment rising significantly within two years. A reduction in vacancies of 20% is associated with, on average, a three-percentage-point rise in the unemployment rate—comparable with what is implied by the recent Beveridge curve. Mr Waller’s argument implies a drop in vacancies of fully 35%.A final problem with the Fed’s plan is that it does not preclude persistent inflation. Even if the labour market returns to balance, inflation could stay high if workers and firms come to expect rapid price increases. In economics textbooks it is high inflation expectations, not the difficulty of bringing demand back into line with supply, that makes it hard to slow price rises without causing a recession. That is why it is such bad news that people’s long-term inflation expectations have recently risen noticeably, according to a survey of consumers by the University of Michigan. Getting expectations down typically means running the economy cold. Each time the Fed is proved to have been overly optimistic, its credibility ebbs, making a dire outcome more likely. ■ More

Watch Daily: Monday – Friday, 3 PM ET

Coinbase will cut 18% of full-time jobs, according to an email sent to employees Tuesday.
CEO Brian Armstrong pointed to a possible recession, a need to manage costs and growing “too quickly” during a bull market.
“We appear to be entering a recession after a 10+ year economic boom,” Armstrong says. “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.”

Coinbase Founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.
Steven Ferdman | Getty Images

Coinbase is laying off almost a fifth of its workforce amid a collapse in its stock and crypto prices.
The cryptocurrency exchange will cut 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has roughly 5,000 full-time workers, translating to a headcount reduction of around 1,100 people.

Shares of Coinbase were up about 1% before markets opened.
CEO Brian Armstrong pointed to a possible recession, and a need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “too quickly” during a bull market.
“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,” Armstrong said, adding that past crypto winters have resulted in a significant decline in trading activity. “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.”
Coinbase had initially said it was pausing hiring. Two weeks later, the crypto giant announced that it was extending the freeze for the “foreseeable future.” Earlier this year, Coinbase said it planned to add 2,000 jobs across product, engineering and design.
“Our employee costs are too high to effectively manage this uncertain market,” Armstrong said. “While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”

The news comes during a deep rout for Coinbase shares. The stock went public via a direct listing last April during a boom in crypto markets and investors clamoring for high-growth tech stocks. Coinbase’s stock is down 79% this year and 85% from the all-time high. Meanwhile, bitcoin has dropped to near $22,000 and has lost 53% of its value this year.
San Francisco-based Coinbase reported a slump in users in its last quarter and a 27% decline in revenue from a year ago. The company makes the majority of its top line from transaction fees, which are closely tied to trading activity.

Employees of Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, watch as their listing is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021.
Shannon Stapleton | Reuters

President and chief operating officer Emilie Choi called it a “very difficult decision for Coinbase” but given the economic backdrop,” she said it “felt like the most prudent thing to do right now.”
Affected employees received a notification from HR. If so, the memo was sent to a personal email as Coinbase cut off access to the company systems. Armstrong called it the “only practical choice” given the number of employees with access to customer information, and a way to “ensure not even a single person made a rash decision that harmed the business or themselves.”
Coinbase employees will have access to a talent hub to find new jobs in the industry, including Coinbase Ventures’ portfolio companies. Choi said they would still be “doubling down” on areas like security and compliance and may be “reorienting” employees to near-term revenue drivers.
“If there are any cuts to new product areas, it’s going to be more around experimental venture areas that we’re still very bullish on, but that we don’t want to invest in in this part of the cycle,” Choi told CNBC in an interview at the company’s headquarters.
“We will continue to invest in incredible innovative areas of crypto that we think are emerging over the longer term, but we’re probably going to do those in a more measured way in this type of an environment.”
Coinbase joins dozens of other tech and crypto companies slamming the brakes on hiring. Crypto lender BlockFi said it was cutting 20% of its employees on Monday. Open-source tracker Layoffs.fyi estimates that more than 5,500 start-up and tech jobs have been cut in June alone.
Coinbase’s intention is “that this is a one time event,” Choi said adding that the company has $6 billion of cash on the balance sheet. The company has lived through multiple bear markets in crypto before, also known as “crypto winters.”
“We will power through any macro environment, any crypto winter, or anything that’s coming,” she said. “The reality though, is that we have to adjust when we feel that there’s a very dynamic economic environment in play.”
Tech companies have been fighting low morale and attrition as their stocks get slammed. Last week, a petition posted to a decentralized publishing platform called for the removal and a “vote of no confidence” regarding several Coinbase executives, including Choi.
Coinbase Brian Armstrong called attention to the since-deleted petition, and in a Tweet urged employees to quit if they don’t believe in the company.
TWEET
“We will always encourage our employees to share feedback internally on how we operate as a company – and we have a number of mechanisms in place for them to do so. It’s very much unclear if this document came from within the company,” Choi said. “However, if it did, we’re disappointed that those behind it felt the need to breach the trust of the company and their coworkers by sharing this information in a way clearly designed to drive controversy rather than a meaningful dialogue.” 
Coinbase has no plans to offer additional company equity grants, or cash compensation amid the price drop, Choi said. The company offers annual grants, partially so employees could “mitigate the swings” and volatility in crypto. For employees and investors, the COO likened it to Amazon or Tesla: a long-term investment with volatility in the meantime.
“We think that anyone who makes an investment, whether they’re an employee or investor, will have a handsome return over the longer term,” Choi said. “Coinbase is a long-term play — we have very deep conviction in the long-term value of the stock.” More