Further waves of reckoning swept through the cryptocurrency industry Tuesday, with exchange company Coinbase Global Inc. saying it would cut almost a fifth of its staff and crypto lender Celsius Network LLC hiring a law firm to examine restructuring options.

Coinbase, one of the signal growth companies of the crypto boom, said it was slashing its workforce by 1,100 employees, or about 18% of its staff, because the company had grown too quickly and a potential recession “could lead to another crypto winter.”

In a letter to employees, Chief Executive Brian Armstrong said “our employee costs are too high to effectively manage this uncertain market.”

“We appear to be entering a recession after a 10+ year economic boom,” Mr. Armstrong wrote. “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.”

Meanwhile, Celsius, one of the largest crypto lenders, tapped attorneys from law firm Akin Gump Strauss Hauer & Feld LLP to advise on solutions for its mounting financial problems, people familiar with the matter said. Celsius had told users on Sunday night that it was pausing all withdrawals, swaps and transfers between accounts because of extreme market conditions, adding more turbulence to cryptocurrency prices. A spokeswoman for Akin Gump had no immediate comment. Celsius executives didn’t immediately respond to requests for comment.

The destruction in crypto markets has been broad and deep, with roughly $2 trillion of value having been erased across numerous cryptocurrencies since November, when bitcoin—the most mainstream of them—hit an all-time high of $67,802.30.

Investors have continued to unload assets viewed as risky, like cryptocurrencies and technology stocks, while the Federal Reserve tries to tame the highest inflation in the U.S. in decades. The S&P 500 stock index entered a bear market this week as investors expect the Fed to further raise interest rates.

As of 5 p.m. ET Tuesday, bitcoin traded at $21,991.89, down 5.4% for the day and 68% below its all-time high. Dogecoin, a cryptocurrency that was started as a joke but became established enough to be mentioned by Elon Musk on “Saturday Night Live,” peaked at 67.4 cents in May of 2021 and has crashed by 92% since.

Coinbase, the biggest cryptocurrency exchange in the U.S., has struggled to hang on to users this year as the frenzy in digital assets cooled and markets have been rocky. In May, Coinbase said it lost hundreds of millions of dollars in the first quarter as its trading fees dropped sharply. The number of Coinbase’s transacting users also slid, and the company said it expected trading volumes and users to drop again in the second quarter.

Since the earnings report, things have gotten worse for cryptocurrency prices, Coinbase’s stock and markets in general.

Coinbase’s IPO last year was deemed a watershed moment for the crypto industry, which had started a decade before as an experiment in digital money. Its debut was hailed by some as similar to when other sector-defining companies went public, such as Netscape in the 1990s. When Coinbase—which says it is “remote-first” and doesn’t maintain a headquarters–went public, the first trade of its stock was at $381, and shares rose as high as $429.54. On Wednesday, it closed at $51.58.

Last week, Mr. Armstrong tweeted criticism of a petition by Coinbase employees to remove some executives, not including Mr. Armstrong, from the company because “the executive team has recently been making decisions that are not in the best interests of the Company, its employees, and its shareholders.”

In a June 10

Twitter thread that spanned 16 tweets, Mr. Armstrong said, “if you have no confidence in the execs or CEO of a company then why are you working at that company? Quit and find a company to work at that you believe in!”

Coinbase said it expects to have 5,000 staffers following the layoffs and that laid-off employees will get at least 14 weeks of severance pay.

Other crypto-focused companies have recently announced layoffs as crypto prices have plunged. BlockFi, a crypto trading and lending platform, said Monday it would reduce its head count by 20% as it said “the macroeconomic environment has shifted dramatically.”

The CEO of Crypto.com, the company that recently put its name on the Los Angeles Lakers’ arena and ran a Super Bowl ad featuring LeBron James, said his firm would make “targeted reductions” of about 5% of its workforce, or 260 jobs. Earlier in June, crypto exchange Gemini Trust Co. cut 10% of its staff, citing the effects of the market downturn.

The layoffs come after a hiring boom as crypto grew in value. Crypto firms’ hiring had doubled from November to April, according to data collected by ManpowerGroup.

—Caitlin Ostroff contributed to this article.

Write to Nathan Becker at nathan.becker@wsj.com, Soma Biswas at soma.biswas@wsj.com and Alexander Gladstone at alexander.gladstone@wsj.com