View from the Arch #14

Tether’s monster earnings, US equities bounce back, and Tesla wants to move out of Delaware

February 02, 2024

Banger issue this week if I do say so myself. We’ve got the latest on the ETFs, Tether posting some ludicrous numbers (in a good way), Airdrop Alpha, and the weekly shenanigans in traditional markets all covered for you.

This Week in Crypto

Bitcoin experienced a mid-week sell-off following our man Jpow’s presser. Increasing participation of Traditional funds (via ETF, etc) may lead to increased Bitcoin sensitivity to macro data points such as rates and non-farm payroll numbers.

The corn (BTC) bounced back and is sitting pretty at $43,000 - it’s very much trading in correlation to equities. Given the earnings (see section 2), we’ve revised our view from weak bear to short-term neutral, but remain long-term strongly bullish - a thesis that continues to strengthen given the latest data around ETF net inflows ($1.45bn as of 1/31).

$BRRR ETF provider Valkyrie announced a move to BitGo for partial custody. BitGo is of course the custodian of choice for Arch - this is yet another testament to the quality of service they provide.

  • You too can get access to the same custody product suite as the largest institutions in the world, for little to no cost at all - all through Arch. Click here to find out more.

Tether released their quarterly attestation and posted some ridiculous numbers. They reported a $2.85bn profit in Q4 alone with just 60 employees - that’s $47.5m of profit per employee. For context, Goldman Sachs posted $2bn of profit in Q4 and has 48,500 employees, that’s $41k per employee. Best business on the planet?

  • Tether holds $2.8bn in Bitcoin and in 2023 said they plan to allocate 15% of profits to more buys - $420m of buy pressure. Last week we wrote about the US government filing to sell ~$130m of Silk Road coins - looks like peanuts now, doesn’t it?

Additionally, here is some Airdrop Alpha for our loyal readers:

  • Mode is the Modular DeFi L2, powered by Optimism. Their season 1 airdrop is live and has had over $40m bridged in 24 hours. 5.5% of the supply is available for airdrop to users. You can find out how to get involved here.

  • Andy from the Rollup is a close friend of the team - his pod with Aevo is well worth a listen if you want to hear more about a highly anticipated protocol airdrop.

Some of this week’s top performers included TAO (34.7%), SUI (27.5%), and LINK (23.6%). It was a relatively dull week in crypto-related equities; we’ll be watching for their earnings over the coming days. It was not however dull by any means in wider traditional markets - catch the next section for more.

News from Crypto Markets

This Week in TradFi

Not even the Fed can throw a spanner in the works of the current market rally. Into Wednesday's FOMC meeting, the S&P was printing record intraday and closing highs for the best part of a week before markets signaled their displeasure with the Fed's rate decision - in spectacular fashion:

  • Much of the good work was undone with an immediate drop of 1.6% - 2.2% across US equity indices, following the news that the Fed wasn't moving.

  • Rate cuts are coming - perhaps not until May rather than March (which is what the market had been pricing in). Nevertheless, the tone is so bullish right now that equities were bouncing back on Thursday, up almost 1%.

The earnings season was in full swing, but big tech earnings generally disappointed.

  • Microsoft beat on earnings and revenue, but guidance was pushed lower.

  • Alphabet reported a small miss (revenue $66.5bn vs $66.8bn) but previous lofty market valuations needed the company to beat.

  • AMD's Q4 earnings were in line and margins flat, but Q1 guidance missed estimates by some 6.1%.

  • Amazon net sales are up 14% and Meta revenue is up 25% in Q4. Smashed. Meta also announced a $50bn buyback.

In China, the failure of the Evergrande property empire (with others following) highlights the urgency for the Xi government to get on top of the deteriorating property market, alongside rising domestic pressures elsewhere: rising youth unemployment, declining consumption growth, falling factory activity and more. The Chinese equity markets don’t look much better as they are recording 20-year lows (-50% from peak):

This Week in Tech

The barrage of layoffs continue, but the talk of the week has been about the state that companies choose to incorporate in. In the U.S., Delaware has been the go to state for most incorporations, given its business-friendly corporation laws. You can tell by the data:

However, Delaware’s “business friendliness” came into question this week when Elon Musk’s monstrous $55B compensation package was struck down by a Delaware judge. This was a package that had board approval and was based on performance milestones of Tesla that were incredibly lofty (ex: growing Tesla’s market cap by $600B). Elon was not happy to put it lightly:

Delaware has long benefited from having business-friendly incorporation laws. Just look at what Indian startups (and other foreign startups) go through in order to make it easier to receive funding from US investors:

While Tesla may just be one company that will be changing its state of incorporation, we’ll stay tuned to see if others decide to follow based on the implications of this ruling.

As usual, below are some fundraising announcements, M&A, and tech personnel changes that caught our eye:

Disclaimer: None of the above is financial advice, seriously.