It was unpopular on desktop, but they had an argument as to why they couldn't keep the old extension model without crippling the browser. Firefox mobile already used the new extension type, and if there's some technical limitation that justifies killing existing extensions then I've not heard about it.
They're not killing it. Preview/Fenix is essentially a complete re-write of the mobile browser, and they just haven't added all of the extension hooks back into the new version yet.
(I work for Mozilla, but not specifically on mobile.)
The reason I've heard is that the new GeckoView architecture requires piping each and every WebExtension API through a Java layer (that naturally doesn't exist on desktop). So it's some amount of manual work per API entry. The definition of the MVP only included critical extensions like reader mode and uBlock. And there's still a fair bit of other work remaining for the MVP, so nobody can spare time for noncritical tasks.
Whether that's the right definition of the MVP, and how many resources we'll be able to spend on it post-MVP (especially post-layoffs)... your guess is as good as mine, I'm going by the same public info you have.
Extensions are a pretty important distinguishing factor of mobile firefox, though.
