Honk Kong ETFs, Rising Inflation & Google's Comeback

We know you come to our newsletter for our impeccable crypto takes (still not investment advice, though), but just in case you missed everything else going on this week, we’re here for you there too. 

The eclipse was on Monday, however sadly New York City wasn’t in the path of totality, so the Arch team was focused on other things:

Speaking of shareholder value, a tweet sharing a Notion template to manage a marriage blew up this week.

The University of Connecticut and the University of South Carolina won the men’s and women’s NCAA championships this past weekend. If you won money from your work March Madness bracket (or from our upcoming altcoin bracket contest), maybe you can buy the 44-story St. Louis AT&T tower, which recently sold for a measly $3.6M.

Anyway, on to what you come here for!

This Week in Crypto

If I had to pick a single word to describe Bitcoin this week - it would be resilient. Despite the previous weeks’ GBTC headwinds and this week’s above-expectation CPI print (see next section) affecting rate expectations, we are still above 70k. This, in the context of the upcoming halving promising to reduce yearly issuance to the tune of $11.5BN leads me to ruminate on another word: Higher.

To linger on the ETFs for a moment: we started with a mixed week in the face of a large GBTC outflow. GBTC however then went on to print it’s lowest daily outflow on Wednesday and CEO Michael Sonneshein said he expects this trend to continue as an “equilibrium” is reached.

Some more good news came overnight as a Honk Kong ETF looks set to be approved, allowing a flood of Asian capital to access both Bitcoin and Ethereum:

As we’ll touch on in the next section, a CPI print gave markets a mid-week scare, and rate forecasts were readjusted. The difference in opinions (tantamount to guesswork) from Jamie Dimon, to the President, to members of the FOMC is to us, a stark reminder of the lunacy of centrally managed monetary policy.

• Monetary policy, or interest rates, is the opportunity cost of capital today vs tomorrow - in other words, it is the price of time.

• We correctly pour scorn on those who suggest centralized markets for bread, we readily accept the premise that the economy must be run on a centralized market for our most important commodity - Time.

While the suits argue over whether or not the 12 unelected members of the FOMC will cut rates by 25bps this year, there will be no dispute on the nature of Bitcoin’s monetary policy.

• If Benjamin Franklin were alive today, he’d amend his infamous quote to something along the lines of “there are only 3 certainties in life: death, taxes and the next Bitcoin Block”. The halving is just over a week away.

We’ll leave you with a few quick headlines:

• Coinbase generated over $20m from Base revenue in March alone. We’re anticipating a wildly bullish Q1 earnings report in May.

• The SEC appears to be going after Uniswap as they issued a Wells notice this week. It was only a matter of time. This case is one we will be keeping an eye on.

• Debridge launches a points system - if you are bridging about different chains, qualify yourself for a likely airdrop!

• And finally, a new Arthur blog dropped. TLDR: Bearish April. It provides a nice counter perspective to our bullish sentiment.

This Week in TradFi

The March CPI inflation report came out on Wednesday, reporting higher inflation rates than expected. U.S. consumer prices have increased 0.4% for the month of March and 3.5% for the last 12 months, up from 3.2% reported in February’s report, the highest annual gain we’ve seen in the last six months. 

• This is spurred by price increases in almost every major category, particularly gas and shelter costs. The only categories that saw falling prices were used and new cars and fuel oil.

• Hopes of a June cut were dashed, but the President maintained his prediction of a rate cut this year.

• To cut or not to cut? The decision will of course depend on future CPI prints - the Fed’s Collins is anticipating a slowdown in demand in 2024 while Jamie Dimon (below) sees inflationary pressures continuing.

Internationally, the European Central Bank continued to hold interest rates high this month but indicated it might cut rates in June, deviating from the Fed’s stance. 

• The ECB emphasized the Eurozone’s differing economic conditions from the U.S., with inflation there at only 2.4%, 0.4% above targets.

• The Eurozone has seen six straight quarters of economic stagnation, in addition to a softening labor market and slower wage growth - all of which point to lower risks of price growth than the U.S. 

• The Bank of Canada is following ECB’s lead, also indicating it is interested in a June rate cut if inflation continues to cool. This cut would ease the 23-year high of 5% the bank currently maintains.

Other interesting trends we’re keeping an eye on:

• Foreign investors are snapping up Japanese stocks.

• China’s economy grew 4.6% in Q1, the slowest growth they’ve seen in a year. They are navigating a tricky economic situation with deflationary risks.

• UK housing prices fell 1% in March, the first drop since September 2023.

This Week in Tech

The Google Cloud Next keynote was on Tuesday, and, as expected, there was a heavy focus on AI. Some highlights include:

• The announcement of Google’s latest AI model, Gemini 1.5 Pro, which now offers audio understanding. The model has the ability to listen to, analyze, and output information from audio streams, without the need of a transcript. This is in addition to Gemini’s existing support for text, code, and video. 

• The expansion of Google’s partnership with Nvidia, making Nvidia’s Blackwell platform available to Cloud customers early next year. 

• The announcement of the Google Axion Processor, a new custom CPU, which will be available to Cloud customers later this year.

The keynote drove shares of Alphabet to record-high $157 Tuesday morning. You can watch the full opening keynote here. 

And just in case you’re getting bored of AI, lots of non-AI expansion happened this week.

• Proton, known for its flagship service ProtonMail, bought Standard Notes, a privacy-focused note-taking service.

• Automattic, the parent company of Wordpress.com, Tumblr, and more, acquired Beeper, a messaging app consolidating all your messaging services into one inbox.

• Vertex Pharmaceuticals has agreed to acquire biotech company Alpine Immune Sciences for a whopping $4.9B, about $65 per share.

• The sports collectibles marketplace Goldin was sold to eBay, expanding eBay’s investment in trading cards. 

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

• Collaborative Robotics, founded by the former vice president of robotics at Amazon, has raised a $100M Series B, led by general Catalyst.

• Guesty, a rental property management platform, has raised a $130M Series F at a $900M post-money valuation. 

• Mezo, a permissionless Bitcoin economic layer, came out of stealth with a $21M round, led by Pantera Capital.

• Checkr, an employee background screening tool with a $5B valuation in 2022, announced a layoff of almost 400 employees, or 32% of its workforce.

Arch is building a next-gen wealth management platform for individuals holding Alternative Assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services, powered by BitGo.

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