View from the Arch #10

BTC ETF’s imminent approval, rates stay higher for longer, and ByteDance moves into pharma

January 05, 2024

Happy New Year! Less than a week into 2024, and we’ve already discovered it literally pays to read our newsletters - if you read our previous editions where we mentioned there will be airdrops for $TIA and $ATOM stakers, you would have qualified for the $DYM and $SAGA airdrops.

Nothing beats free money from the sky.

This Week in Crypto

Bitcoin has shown a few weeks of consolidation around the low 40s. It was a volatile week with the upcoming ETF response deadline and surrounding drama. One of the reasons for the volatile this week was due to a Matrixport report arguing that the ETFs were likely to be denied. The report led to over a $1bn in liquidations on Wednesday. In our view, the report offered little in the way of cutting financial analysis or shrewd journalism. For us, our view remains the same, all indicators point towards approval any day now. A denial would certainly be a massive shock.

Subtle clues are coming out from those “in the know”, like Anthony “The Mooch” Scaramucci who runs Skybridge Capital - a firm that has filed for a Bitcoin ETF.

Bitwise released an interesting report based on a survey they ran at the backend of 2023, the highlights of which you can see in the tweet below. If an ETF is approved, be sure to keep a close eye on the trading volumes in the forthcoming days and weeks to get a sense of early demand, and if these numbers actually hold any guidance.

Elsewhere, the top performers this week were $TIA +29%, $ARB +26%, $SEI +25% and $LDO +18%. The pullback across equities also affected crypto related stocks - Coinbase (-10%) had a pullback, as did miners which have since shown strong recovery.

News from Crypto Markets

  • The headlines this week are rather uninteresting - everyone is beating a dead horse (The ETF). So I’ll leave you with just one piece of assigned reading this week, the best blog in crypto, Arthur Hayes’ Signposts.

This Week in TradFi

It was a little deflating getting back into the saddle with yields rising enough to ensure that the opening sessions of 2024 got off to a dull start. That is, equities down, bond prices down/yields higher, oil up amid some geopolitical tensions, and continued weak macro-economic data. The latest Fed minutes didn't help, with officials suggesting rates stay higher (at these levels) for longer.

All of a sudden one might be forgiven for thinking that we're in a bearish market. We are not. The expectations are still that bullish momentum will build through the next few months taking stocks, bonds, and other risk assets to considerably higher levels from where they currently reside. We would position your portfolio for that eventuality.

The incoming data though isn't going to underpin any rally, because it will be patchy at best. We're already witnessing a material downturn in Eurozone manufacturing activity, for example. Inflation across the region hasn't been tamed either. And in China, the economy continues to struggle to shake-off the lockdown era slowdown, as the authorities try to stimulate and regulate at the same time. The populous isn't buying it. The policy response generally is going to be more stimulus, everywhere. In the West, it will take the form of lower rates, the principal driver for risk rallies. We might just have to wait a bit longer before it filters through into the markets.

Finally, we have non-farm payrolls to come too (consensus 163k), which might set a marker for risk assets for January.

This Week in Tech

This week was a quiet week in tech, as most people are coming back from the holidays, unpausing their gym memberships, and getting back into the swing of things. That being said, Canva’s secondary sale, OpenAI’s revenue announcement, and ByteDance’s (TikTok’s parent company) newest business unit caught our eyes.

While many growth stage companies are waiting for the IPO markets to open back up, investors and employees are increasingly becoming impatient and looking for ways to access liquidity. As part of this, there’s been a huge uptick in secondary sales volumes, where investors sell their shares to another investor in a private deal. Often times these deals are done without company approval using platforms like Forge, EquityZen, or the likes. However, some companies have been formally structuring rounds for the sole purpose of secondary transactions in order to coordinate liquidity outcomes for early investors and employees. Reports leaked this week that Canva is nearing a $1B stock sale for employees and investors. Other companies like SpaceX and OpenAI have done the same thing, and we expect to see a few more of these prior to the IPO market opening back up. Speaking of OpenAI, they announced that their annualized revenue passed $1.6B, growing 20% from October of 2023 alone!

In other news, ByteDance has been moving beyond social media and into Biology, Chemistry, Drug Discovery, and Pharmaceuticals based on their job postings and reports that emerged this week. While ByteDance is keeping this under wraps, the team has been hard at work and has already released research on protein design, drug design, and an open-source AI tool for computational biology. While ByteDance and TikTok have emphasized that they largely operate as separate companies, there are rumblings that TikTok data will be used in ByteDance’s drug discovery and science efforts. It makes sense that the data from TikTok videos, specifically the health and wellness related ones, as well as the purchasing activity on TikTok’s e-commerce store could help inform where it should focus its efforts on the science and pharmaceutical business. If this is true, we expect an increase in government security here and wouldn’t be surprised to start seeing TikTok get banned in major countries. We’ll keep you all posted as this progresses!

As always, below are some fundraising announcements and M&A activity that caught our eye: