[Affected versions]:
Nightly 79.0a1 (2020-06-22)
(notice that beta and release won't have mute button available)

[Affected platforms]:
MacOs 10.14
Win 10 pro

[Preconditions]
Have devtools.responsive.browserUI.enabled = true

Steps :

1- Launch the Firefox browser
2- Reach youtube
3- Hit Cmd+option+M in order to start Responsive Design Mode, have both "reload when touch simulation is toggled" and "reload when user agent is changed" CHECKED, and Enable Touch Simulation.
4- select any device from the list for example (if responsive option is by default pip button won't be displayed until starting video)
5- Notice that " tap to unmute" button is displayed
6- click on pip button to open pip mode
7- try to mute/unmute

Expected Results :
button should work with Touch simulation on and off

Actual Results :
button is not working the first time pip is opened, user needs to close pip and open it again and then button will work.

note: if trying these steps with touch simulation off, pip works every time

Thanks for reporting! I was also able to reproduce on Firefox 79 Nightly.

Hi Micah, when having touch simulation on and touching pip button, video pauses, but this won't happen with touch simulation disabled.
Please see attached video. Best,
Clara