Coinbase CEO Brian Armstrong said Tuesday that the company will cut roughly 14% of its workforce, or about 700 employees, citing a combination of market volatility and AI quickly changing how the company operates.

The move comes ahead of Coinbase's first-quarter earnings, which the company is scheduled to report Thursday. Shares fell 3% midday, after gaining in premarket trading.

In a memo to employees, which he shared on X early Tuesday, Armstrong described the decision as necessary to position the firm for its "next phase of growth" while navigating the current downturn in the crypto market. He cited two "forces converging at the same time": the current pullback in the crypto market and "AI changing how we work."

Although crypto is "on the verge of the next wave of adoption," he said, "our business is still volatile from quarter to quarter … 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."

Furthermore, "the pace of what's possible with a small, focused team has changed dramatically, and it's accelerating every day," he said about AI. "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."

Coinbase's move comes amid a broader wave of tech industry layoffs tied to a ramp in AI investment. Earlier this year, Block announced a reduction of "nearly half" of its workforce, citing an "opportunity to move faster with smaller, highly talented teams using AI to automate more work."

Other companies like Gemini Space Station, Pinterest, CrowdStrike and Chegg have also recently announced job cuts attributing the layoffs to AI reshaping their workforces.

Coinbase isn't pivoting away from crypto, however. Armstrong reaffirmed his bullish outlook on crypto, pointing to stablecoins and tokenization, as well as prediction markets, as drivers of the "next wave of adoption" — underscoring the importance of real-world utility and institutional adoption in that future.

Across the crypto industry, exchanges are moving away from the hype-driven, returns-focused revenue streams that originally fueled their growth and are instead entering a more disciplined phase centered around steadier revenue, regulation, compliance.

Coinbase expects the restructuring plan to be complete in the second quarter and incur between $50 million and $60 million in expenses, according to a Securities and Exchange Commission filing.

Clear Street analyst Owen Lau said the move should drive profitabiltiy going forward and that given the crypto market downturn, Coinbase is signaling to investors that it's manging that pressure as it has in the past.

"The first quarter results are expected to be weak because of the crypto bear market," Lau told CNBC. "The company wants to tell investors that management is actively managing the cost base to deliver positive adjusted EBITDA through the cycle."

Bitcoin is down 6% for the year and underperforming gold, oil, the dollar index and the S&P 500. Coinbase has lost 12% in the same period but is outperforming exchange competitors Robinhood and Gemini.

This isn't the first time Coinbase has carried out layoffs during a crypto downturn, it made significant cuts during the 2022 market decline.