Author: Claude, Deep Tide TechFlow

Deep Tide Introduction: Coinbase announced layoffs of about 14% (nearly 700 people), with CEO Armstrong defining the company as being rebuilt into an "intelligence, where humans align at the edge." The layoffs are accompanied by radical organizational restructuring: management levels are compressed to a maximum of 5 layers below the CEO, eliminating pure management positions to establish "player-coaches," and experimenting with a "one-person team" model where one individual controls an AI intelligence to complete the entire process of engineering, design, and product. Mizuho analysts openly state that the crypto winter is the real reason for the layoffs, while AI is merely a "convenient excuse."

On May 5, Coinbase announced layoffs of about 14%, affecting nearly 700 employees, and CEO Brian Armstrong characterized this adjustment in an internal letter to all employees as a fundamental operational reconstruction, rather than a simple cost reduction.

Armstrong shared this internal letter on the X platform, providing two reasons for the layoffs: the crypto market is in a downward cycle, with revenue under pressure; AI is fundamentally changing team productivity. According to documents submitted by Coinbase to the SEC, this restructuring is expected to incur costs of $50 million to $60 million, primarily for cash severance expenses, which will be concentrated in the second quarter of 2026.

On the day the news was released, Coinbase's stock price fell by about 2.5%. The company will disclose its financial report for the first quarter of 2026 this Thursday.

The crypto winter combined with AI narrative raises doubts about the true reasons for layoffs

Mizuho Securities analyst Dan Dolev told Bloomberg that the crypto winter "is likely the true reason for the layoffs," with AI being merely a "convenient excuse."

This judgment is supported by data. Coinbase recorded a net loss of $667 million in the fourth quarter of 2025, ending a streak of eight consecutive quarters of profit. Net revenue for the quarter decreased by 21.5% year-over-year to $1.78 billion, with earnings per share of $0.66, significantly lower than the analyst expectation of $0.92. Revenue related to trading plummeted by nearly 37% year-over-year to $983 million. Bitcoin has continued to retreat since reaching an all-time high of about $126,000 in October last year, and by the announcement date of the layoffs, it had rebounded to about $81,000, but still down more than a third from its peak.

Aleksandar Tomic, Vice Dean of Strategy, Innovation, and Technology at Boston College, told Fortune that some CEOs frame AI restructuring as a "positive packaging" for layoffs. He pointed out that instead of acknowledging that business problems led to layoffs (which the market would view as negative), claiming "layoffs for efficiency gains" often boosts stock prices.

OpenAI CEO Sam Altman previously warned that some companies are engaging in "AI washing," attributing layoffs unrelated to AI to AI.

Armstrong's organizational experiment: 5-layer structure, player-coaches, one-person teams

The layoffs are just a part of Armstrong's current reform. Even more radical is the complete overhaul and reconstruction of the organizational structure.

Armstrong wrote on the X platform: "We are not just reducing headcount and cutting costs; we are fundamentally changing the way we operate: rebuilding Coinbase as an intelligence, where humans align at the edge."

Specific measures include four items:

Management levels are compressed to a maximum of 5 layers below the CEO and COO. Armstrong stated that "hierarchy slows down speed and creates coordination taxes."

Pure management positions are eliminated, and all managers must also be strong individual contributors, which Armstrong refers to as "player-coaches." Each manager is responsible for over 15 direct subordinates.

Formation of "AI-native pods," concentrating employees most proficient in using AI, granting them greater output leverage.

Testing the "one-person team" model, where a single employee simultaneously takes on all roles of engineer, designer, and product manager, using AI intelligence to complete work that would typically require an entire team.

Armstrong claims that in the past year, engineers have been able to "deliver work that used to require a team weeks to complete in just a few days," and non-technical staff are also writing production code using AI.

The trend of "super managers" spreads, Coinbase is not an isolated case

Coinbase's management reform is in line with the "super manager" trend in the U.S. tech industry.

According to Gallup data, the average number of direct reports per manager in U.S. businesses has risen from 10.9 in 2024 to 12.1. The new application engineering team at Meta has even pushed this ratio to 50:1.

The 15:1 target set by Coinbase falls between the two, but along with experimental structures like "player-coaches" and "one-person teams," its radicalness is unparalleled in the crypto industry.

Armstrong has been assertive in promoting AI tools. He previously purchased GitHub Copilot and Cursor licenses for all engineers and required everyone to complete tool onboarding training within a week, rather than the "several quarters" previously estimated by the company. Those who failed to complete it on time were directly fired.

The wave of layoffs in the crypto industry accelerates, AI becomes the unified narrative

Coinbase is not alone. Since 2026, layoffs in the crypto and fintech sectors have formed a clear trend, with nearly every company citing AI as one of the core reasons.

Block (formerly Square) laid off about 40% of its staff (over 4,000 people) in February, with founder Jack Dorsey attributing the layoffs entirely to the efficiency gains brought by AI tools, predicting that most companies will follow suit in the short term. Block's stock price rose nearly 18% on the day the layoff news was announced.

Additionally, Crypto.com recently cut 12% of its workforce, Algorand cut 25%, both citing a combination of market downturn and AI efficiency improvements as the rationale.

According to the JOLTS data from the U.S. Bureau of Labor Statistics, the information industry has already laid off 178,000 people in the first three months of 2026. On the prediction market platform Kalshi, traders are placing a 92% probability bet that the total layoffs in the tech industry in 2026 will exceed the 447,000 in 2025.

Review of Coinbase's historical layoffs and severance plans

This is not Coinbase's first significant layoff during a crypto winter. During the market crash in 2022, the company cut 18% of its workforce. Armstrong mentioned in this internal letter that Coinbase has experienced four crypto winters in the past 13 years.

U.S. employees affected by the layoffs will receive at least 16 weeks of base salary, plus an additional two weeks of pay for each year of service. The severance package also includes the next equity vesting and six months of COBRA health insurance. The systems access for affected employees was revoked immediately on the same day, which Armstrong referred to as "the only responsible choice to protect customer information."

At the end of the internal letter, Armstrong reiterated his optimism about the crypto industry, listing stablecoins, tokenization, and prediction markets as the drivers of "the next wave of adoption." The company has not cut its investment in these areas.