Cutting one-seventh of the team two days before earnings report: Is the story of AI transformation really about AI or the crypto winter?

Written by: ChandlerZ, Foresight News

On May 5, Coinbase CEO Brian Armstrong tweeted that the company would cut approximately 14% of its workforce, affecting about 700 people. In its SEC Form 8-K filed the same day, the company disclosed that it expects to pay $50 million to $60 million in severance and related costs, which will be included in the Q2 2026 earnings report. Laid-off employees had their access to company systems cut off the same day. U.S. employees will receive a minimum of 16 weeks of base salary (plus two weeks for each additional year of service), the next scheduled equity vesting, and 6 months of COBRA health insurance coverage.

After the news was announced, Coinbase's stock rose as much as 4.2% in pre-market trading but turned negative during regular hours, closing at $197.75, down 2.58% for the day.

Eliminate Pure Management Roles, Experiment with "One-Person Teams"

Armstrong attributed the layoffs in his tweet to the convergence of two forces: the cyclical fluctuations of the crypto market and the fundamental changes AI is bringing to work methods. However, the focus of the entire tweet clearly leaned toward the latter.

He said that over the past year, he has seen engineers use AI to complete work in days that previously took a team weeks, non-technical roles writing production-level code, and a large number of workflows being automated. Based on these changes, he announced three transformations for Coinbase:

• Compress the organizational structure to a maximum of five layers below the CEO/COO, increase the manager-to-subordinate ratio to more than 1:15, and reduce coordination costs caused by layers.
• Eliminate pure management roles; all managers must also be strong individual contributors. Armstrong used the analogy of "player-coach", requiring leadership to lead teams while also doing hands-on work.
• Form AI-native pods, even experiment with "one-person teams" where a single employee takes on the roles of engineer, designer, and product manager simultaneously, relying on AI agent clusters to deliver multi-role outputs.

Armstrong used a radical metaphor to characterize this restructuring: Coinbase is being rebuilt from a company into an "intelligence" (smart system), with humans aligned at the edges.

Q1 Revenue Expected to Drop 25%, Layoffs Two Days Before Earnings Report

The AI narrative sounds good, but the timing of the layoffs reveals more information.

Coinbase's Q1 2026 earnings report will be released on May 7, just two days after the layoff announcement. According to CoinDesk, Wall Street's expectations for this quarter are not optimistic. Due to a sharp decline in trading activity and falling token prices, the upcoming Q1 earnings report may underperform, and several major investment firms have already downgraded their ratings for Coinbase and other platforms in advance. Barclays noted that Coinbase's trading volume in March was the lowest since September 2024, and there were no signs of improvement in April. The bank estimates that Q1 trading volume fell by about 30% compared to the previous quarter.

Oppenheimer lowered its estimate of Coinbase's trading volume for this quarter from $244 billion to $211 billion, and now expects total revenue to be $1.48 billion, below its previous forecast and market consensus.

Bitcoin fell 22% in Q1, ETH fell 30%, and global crypto exchange trading volume dropped nearly 48% from its peak in October 2025 to $4.3 trillion in March 2026, the lowest since October 2024. According to AInvest analysis, this layoff can be seen as a cost-frontloading move before the release of weak results; the one-time restructuring cost of $50 million to $60 million will be booked in Q2, while operating expenses in subsequent quarters will be reduced as a result.

Bloomberg reported that Dan Dolev, an analyst at Mizuho Securities, said the crypto winter "is probably the real reason for most of the layoffs", and AI is more like a "convenient excuse".

This is not the first time Coinbase has laid off a large number of employees during a market downturn. In June 2022, the company cut 18% of its workforce (about 1100 people); in January 2023, it cut another 20% (about 950 people). Both layoffs occurred during the crypto winter. Armstrong's reasons at the time were over-hiring and recession risks, with no mention of AI. Three years later, the cyclical pattern of layoffs remains unchanged, but the explanatory framework has shifted to organizational evolution in the AI era.

Crypto Industry Collective Downsizing: Gemini Cuts 30%, Block Cuts Nearly Half

Coinbase is not alone; since 2026, crypto and fintech companies have seen a wave of intensive layoffs.

Block (parent company of Square) cut more than 4000 employees in February, close to 40% to 50% of its total workforce. CEO Jack Dorsey explicitly cited AI as the primary driver. Gemini has cut about 30% of its workforce this year, reducing its total headcount to about 445, while closing its exchange operations in the UK, EU, and Australia to focus on the U.S. market and prediction markets. Gemini reported a net loss of $583 million in 2025, and the financial pressure behind the layoffs is clear. Crypto.com laid off 12% of its workforce (about 180 people) in March; CEO Kris Marszalek said the company must act quickly on AI integration. The Algorand Foundation cut a quarter of its team, citing macro uncertainty. OP Labs, Messari, and others have also announced layoffs in recent weeks.

A common feature of this wave of layoffs is that even companies with relatively healthy balance sheets are proactively cutting staff and transitioning to AI-driven lean operating models. AI has become the most frequently mentioned keyword in layoff announcements.

80,000 Displaced: Silicon Valley's "AI Washing" Controversy

Crypto industry layoffs are nested within a larger Silicon Valley layoff wave. According to statistics, in Q1 2026, 86 tech companies laid off more than 80,000 people, a more than doubling from about 30,000 in the same period of 2025. In late April, Meta and Microsoft together disclosed more than 20,000 potential layoff positions. Data from March 2026 shows that AI was listed as the primary reason for layoffs in the U.S., accounting for 25% of all layoffs.

However, this trend has also sparked criticism of "AI washing". OpenAI CEO Sam Altman publicly stated that almost every company laying off staff is talking about AI, "whether it's actually because of AI or not".

Fortune magazine analyzed this, saying that during the pandemic, cheap capital flooded into Silicon Valley, and companies recruited aggressively to meet surging demand and competition, leading to a breakdown in discipline. When interest rates returned to normal and growth slowed, the previous staff expansion became unsustainable. AI provides a more polished technical narrative for layoffs, but the underlying logic is cost correction.

For Coinbase, this judgment is particularly applicable. During the bull market from 2021 to early 2022, Coinbase rapidly expanded from about 2000 employees to more than 6000. After two rounds of layoffs, it returned to around 5000. This time, cutting another 700 people marks the third large-scale layoff in four years, and the mark of the cycle is deeper than that of AI.