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Coinbase made mistakes at Pets.com

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Crypto has long been touted as the tradition-breaking future of finance, but its collapse follows a decades-old script.

Take Coinbase. The crypto exchange went public at $250 per share in April 2021, when Bitcoin was worth over $63,000, near its all-time high. Now Bitcoin is flirting with $20,000 and Coinbase is trading below $50 per share. It is also laying off 18% of its workforce, roughly the number of people it has hired this year.

It’s not alone. BlockFi, the Peter Thiel-backed crypto lender, is laying off 20% of its employees. Gemini Trust Co., founded by the Winklevoss twins, is reducing its workforce by 10%. (The Winklevi drowned their sorrows soon after by playing a rock set in Delaware, including a cover of Rage Against the Machine.)

It’s too reminiscent of the dot-com crash, when nosebleed stock prices tricked founders into ignoring warnings of a bubble and hiring too many people too quickly. The payback has left acres of empty desks and abandoned Aeron chairs.

“We grew too quickly,” Coinbase CEO Brian Armstrong wrote in a blog post. He noted that the company, which makes money from crypto transaction fees, had just 1,250 employees at the start of 2021, growing to nearly 5,000 in the last quarter. “It is now clear to me that we have over-hired.”

Common themes running through all of these crypto layoff announcements are the need to cut costs ahead of a “crypto winter.” But these businesses didn’t need a Ned Stark to tell them winter was coming. The dotcom bubble seemed obvious to anyone with eyes to see in the early 2000s, and the crypto scum has been unmistakable for a year or more. “It could get very big, and very dangerous, very quickly,” warned our editorial last July.

But just as Pets.com blew millions (in 2022 dollars) on a Super Bowl ad in 2000, Coinbase lost around $14 million in its place for the big game this year. Both were huge hits in a way: the Pets.com sock puppet will never be forgotten, and Coinbase’s bouncing QR code was such a hit that it crashed the Coinbase app. Neither ad could hold back the tidal wave that was about to sweep through their respective industries.

About a year after that Super Bowl announcement, Pets.com was liquidated. Coinbase will probably not suffer this fate. A better analogue of Pets.com might be Dogecoin – seemingly unserious, obsessed with cartoon dogs, and ultimately worthless.

Yet Pets.com had only 320 employees at its peak, despite being involved in the physical business of warehousing and shipping pet supplies. Coinbase and its peers have more. They can survive the winter, but end up burning a lot of furniture in the process.

Like the dot-com, railroad, and other busts before it, the crypto winter will likely leave a few hardy survivors. Despite vaporizing $2 trillion in paper wealth, the founders and many crypto-millionaires will land on their feet. Coinbase’s first backer, Union Square Ventures, emerged from the IPO with billions.

Not so lucky are the latecomers who took Matt Damon’s advice in that other infamous Super Bowl 2022 crypto commercial, “Fortune Favors the Brave” — an ad for Crypto.com, which won naming rights from the Staples Center from LA to the absolute peak of the bubble, an event that brought down so many dot-com benchmark anvils that it shattered the ironic matrix.

Nor the thousands of young workers who hoped to make a lucrative career in a supposedly avant-garde industry. Instead, they are the victims of another generation of founders who are making far too many familiar mistakes.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Mark Gongloff is the editor of Bloomberg Opinion and editor of the Opinion Today newsletter. A former editor of Fortune.com, he led business and technology coverage for HuffPost and was a reporter and editor for The Wall Street Journal.

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