Ed Tolson

CEO of Kbit Management Ltd, an asset manager focused on digital asset markets. Computer scientist. Crypto tech and market structure enthusiast.

[Ed Tolson @etolson]

Coinbase is no longer a company, it's now a ... {checks notes} .... intelligence. 🤣🤣

[Brian Armstrong @brian_armstrong]

This is an email I sent earlier today to all employees at Coinbase:

Team,

Today I’ve made the difficult decision to reduce the size of Coinbase by ~14%. I want to walk you through why we're doing this now, what it means for those affected, and how this positions us for the future.

Why now
Two forces are converging at the same time. We need to be front footed to respond to both.

First, the market. Coinbase is well-capitalized, has diversified revenue streams, and is well-positioned to weather any storm. Crypto is also on the verge of the next wave of adoption, with stablecoins, prediction markets, tokenization, and more taking off. However, our business is still volatile from quarter to quarter. While we've managed through that cyclicality many times before and come out stronger on the other side, we’re currently in a down market and need to adjust our cost structure now so that we emerge from this period leaner, faster, and more efficient for our next phase of growth.

Second, AI is changing how we work. Over the past year, I’ve watched engineers use AI to ship in days what used to take a team weeks. Non-technical teams are now shipping production code and many of our workflows are being automated. The pace of what's possible with a small, focused team has changed dramatically, and it's accelerating every day.

All of this has led us to an inflection point, not just for Coinbase, but for every company. The biggest risk now is not taking action. We are adjusting early and deliberately to rebuild Coinbase to be lean, fast, and AI-native. We need to return to the speed and focus of our startup founding, with AI at our core.

What this means
To get there, we are not just reducing headcount and cutting costs, we’re fundamentally changing how we operate: rebuilding Coinbase as an intelligence, with humans around the edge aligning it. What does this mean in practice?

- Fewer layers, faster decisions: We are flattening our org structure to 5 layers max below CEO/COO. Layers slow things down and create coordination tax. The future is small, high context teams that can move quickly. Leaders will own much more, with as many as 15+ direct reports. Fewer layers also means a leaner cost structure that is built to perform through all market cycles.

- No pure managers: Every leader at Coinbase must also be a strong and active individual contributor. Managers should be like player-coaches, getting their hands dirty alongside their teams.

- AI-native pods: We’ll be concentrating around AI-native talent who can manage fleets of agents to drive outsized impact. We’ll also be experimenting with reduced pod sizes, including “one person teams” with engineers, designers, and product managers all in one role.

In short: AI is bringing a profound shift in how companies operate, and we’re reshaping Coinbase to lead in this new era. This is a new way of working, and we need to leverage AI across every facet of our jobs.

To those who are affected
I know there are real people behind these decisions — talented colleagues who have poured themselves into this company and our mission. To those of you who will be leaving: thank you. You’ve helped build Coinbase into what it is today, and I am sincerely grateful for everything you've done.

All impacted team members will receive an email to their personal account in the next hour with more information, and an invitation to meet with an HRBP and a senior leader in your organization. Coinbase system access has been removed today. I know this feels sudden and harsh, but it is the only responsible choice given our duty to protect customer information.

To those affected, we will be providing a comprehensive package to support you through this transition. US employees will receive a minimum of 16 weeks base pay (plus 2 weeks per year worked), their next equity vest, and 6 months of COBRA. Employees on a work visa will get extra transition support. Those outside of the US will receive similar support, based on local factors and subject to any consultation requirements.

Coinbase prides itself on talent density. Our employees are among the most talented people in the world, and I have no doubt that your skills and experience will be highly sought after as you pursue your next chapters.

How we move forward
To the team that is staying, I know this is a difficult day. We’re saying goodbye to colleagues and friends you've been in the trenches with. But here’s what I want you to know as we move forward together:

Over the past 13 years, we have weathered four crypto winters, gone public, and built the most trusted platform in our industry. We’ve made it this far by making hard decisions and by always staying focused on our mission. This time will be no different – nothing has changed about the long term outlook of our company or industry. And most importantly, our mission has never been more important for the world. Increasing economic freedom requires a new financial system, and we’re building it.

The Coinbase that emerges from this will be more capable than ever to achieve our mission.

Brian

[Ed Tolson @etolson]

I keep seeing and hearing people talking on ADLs with the wrong take -- that the main effect and worst part when you get ADL'd is you lose your position and exposure. That's not what's happening. ADLs are loss socialization mechanisms. Losing your position is annoying, but what's really happening is you're being forced to trade out of your position at a non-marketable price. OKX used to do weekly loss socialization on their weekly expiring futures contracts. When Bitmex popularized the perpetual swap (that doesn't have a weekly cycle), they needed a novel loss socialization mechanism. They invented the ADL.

Let's say a retail trader is levered long 100k TRUMP perp with a bankruptcy price of $10. Depending on the leverage, as the price of TRUMP drops past approx $10.10 the exchange will liquidate the retail trader and take over the position. If the exchange can sell TRUMP above $10, there's no loss. Buy what if the price just gaps immediately from $11 to $9? There's a loss to fill of $100k. If the insurance fund is exhausted, then another trader needs to pay $100k to fill the hole. So someone who is short TRUMP perp will get an ADL wherein they are forced to buy 100k TRUMP at $10. But the price of TRUMP right now is $9! So yeah it's annoying that now they don't have the short exposure, but what really happened with the ADL is the exchange took the long trader's $100k loss and handed it to the short trader. Even if they immediately short TRUMP again, they'll be shorting it at $9. And they just got forced to buy at $10. $100k was taken from them via the ADL.

[Ed Tolson @etolson]

ATOM, a top-100 token, wicked down to $0 on Binance spot!

[Ed Tolson @etolson]

The MSTR premium is collapsing. Now down to ~1.18 or 1.32 depending on if you dilute the shares. I think the DAT company run is coming to an end. Once the big boy gets close to 1x NAV, the story doesn't work any more.

[Ed Tolson @etolson]

Immediately buy more gold!

[Jim Cramer @jimcramer]

I like gold but that's a bad reversal

[Ed Tolson @etolson]

The SEC has allowed digital asset ETFs to do in-kind creation and redemption.
https://t.co/4AzwgSrSDe

[Ed Tolson @etolson]

Altcoins have been on a run in the last two weeks, bringing Bitcoin dominance down from 65% to 61% and taking the total digital asset market cap to $4 trillion for the first time ever.

[Ed Tolson @etolson]

XRP is shooting up and made a new all time high

[Ed Tolson @etolson]

The US administration: We've got the smartest ppl in the room here and we've got a plan to sell these gold green cards. It could raise $5T or even $50T from US companies that want to hire the best talent. It could put a dent in or even wipe out the debt!

Come on now, there's just no way it's that easy to raise trillions of dollars. Where's it coming from? Let's do a quick fact check:

[Autism Capital 🧩 @AutismCapital]

🚨NEW: Howard Lutnick and Trump expand on the Trump "Gold Card" program

LUTNICK: "The old EB-5 program was poorly overseen and poorly executed. You invested $1M and got a visa and that would lead to a green card. There was no vetting.

The new idea here is that we will have a proper agreement here where for $5M they'll get a license from the Department of Commerce, make an investment in the old EB-5 program, and be able to do business in the US.

200,000 of these Trump Gold Cards are $1T to pay down the debt."

TRUMP: "You don't have to promise to create any certain amount of jobs. They can be people hired right out of college. A company like Apple may want to make an investment in a person, like an athlete.

We don't want to lose global talent, this allows companies to pay for them if they want them. The Gold Card is also a path to citizenship. I think we're going to sell a lot of these.

1M Gold Cards is $5T. 10M Gold Cards is $50T. That means are debt is totally paid off. I don't know if we'll sell that many, but we're going to sell a lot.

Everybody wants to come to America. And they'll all be vetted."

[Ed Tolson @etolson]

Or maybe instead of holdings customers' assts in custody, they misappropriated them & used them to buy real estate & make VC investments.

You're fired Sam, please go away.

[SBF @SBF_FTX]

5) Maybe we just didn’t really have anyone free to manage them right then. Maybe they worked best remotely, but our company communicated in-person. Maybe they wanted to work on a particular project, and it just wasn’t what the company needed.

[Ed Tolson @etolson]

BTC has fully recovered from the Asia sell-off, while ETH, which seemed to be leading the way down, is still down ~8%.

[Ed Tolson @etolson]

Digital asset market fell hard in the Asia morning

[Ed Tolson @etolson]

@ErikVoorhees MIT grads in the crypto space have already suffered through a lot. First SBF damaged our alma mater's reputation. Then Gensler both by his association and damaging policies. And now this. We're innocent victims and we've suffered enough. Mercy! 🙏

[Ed Tolson @etolson]

@tyler @MIT @Gemini Woah now, simmer down guys. Us MIT alums in the digital asset space already suffered through his policies, no need to punish us again for his misdeeds.

[Ramp Capital @RampCapitalLLC]

Throwback

[Ed Tolson @etolson]

Friday evening Trump launched an official memecoin on Solana. It's absolutely gone bonkers, becoming a top-20 token with an 11 figure market cap. The exchanges have all rushed to list it. It's the hot token of the week, but soaring directly into the top-20 is pretty unique.

[Ed Tolson @etolson]

Be on the lookout for some crypto-focused executive orders Monday after the inauguration.
https://t.co/UNxZXAL5gE

[Ed Tolson @etolson]

@sjdedic Note that a high percentage of claims have been purchased by Wall Street distressed firms which will definitely not be purchasing any crypto with the proceeds.

[Ed Tolson @etolson]

@JacobKinge Where did you get the figure that 85% of US publicly traded cos have market cap less than $643 million? Doesn't pass the smell test.

[Ed Tolson @etolson]

@mikevanrossum Try sub 20 cents. But in seriousness, there was a ton of risk at that stage, and no one knew that the case would turn out as well as it has.