Bitcoin's Slump, The Middle East, and Humane's Botched Launch

We hope your bags are not as underwater as Dubai was earlier this week. If you didn’t know, hordes of crypto folks descended on the city this week for Token2049 - they would have been right at home.

This Week in Crypto

I’m sure you’ll know that it’s been another red week this week. But you need to zoom out fellas. Just zoom out. It’s long been a meme that one day the bankers will be buying our bags, now it’s finally real, do not get shaken out. Do not let the bankers buy your bags!

The ETF data below shows a real stagnation on the demand side with a record-low $IBIT flow on Wednesday - we look like we’re heading for a full week of net outflows for the first time.

Some slightly more positive news can be found from 13F filings which will be rolling in until the c.15th of May. 13F filings are quarterly reports that investment managers with $100M+ in assets are required to file with the SEC These will give us further insights into the market adoption and allocation to Bitcoin from traditional allocators.

One of the contributing factors to the market’s anemia this week is certainly the unpredictability of the geopolitical situation in the Middle East.

• Our view is of course that Bitcoin is a global, apolitical and neutral money. It does not discriminate based on place of birth, religion or political affiliation. Indeed, wherever the uncertainties in the Middle East may lead the world, the only true certainty is that the Bitcoin Timechain will continue to produce the next block.

• The Bitcoin halving is estimated to be tonight (Friday), so cancel your plans and crack open a cold one! This will be the Arch team at the office dancing around our Bitcoin Node.

If this is your first halving, rest assured that the debate around whether or not it’s “priced in” occurs every four years. This is a perfectly telegraphed event, and proponents of efficient market theory would have us believe that it, therefore, must be “priced in”. I’m not Einstien but to coin a phrase “In theory, practice and theory are the same, but in practice, they are not”.

• 12 months after prior halvings Bitcoin pulled a 5.5x (2020), a 3x (2016), and an 88x (2012).

• The fact is that no prior halving has been priced in, and Bitcoin is not priced correctly anyway. It’s mispriced by an order of magnitude (or two) at least, as we’ve written about in prior editions.

Along with the halving, a new token standard, Runes, is set to launch on Bitcoin. We suggest you dig into the thread below as we expect Runes to take increasing mindshare in the weeks to come.

Elsewhere, c.50% of altcoin open interest ($9bn) was wiped earlier this week during sharp pullbacks. Ethereum tapped $2850 on the weekend and Solana returned to the low triple digits. $183bn of crypto market cap (Excluding BTC and ETH) was lost between Friday and Saturday alone. Emphatic.

The pain was also felt, to a lesser degree, in crypto-related equities, with most miners down, MSTR down 20%, and Coinbase down 12%.

Finally, if you need some light weekend listening, there was some great stuff in this podcast with Arthur and Will Clemente. They cover everything from the halving, ETF flows, Coinbase, base chain, and Runes.

This Week in TradFi

Israel's restraint in holding off on a response to the massive drone/missile attack prevented a total market rout - but while the threat of a response remains, the market will find it difficult to rally in any meaningful way.

• We would think that the geopolitical jitters persist - with a delay until the end of the Passover period (to end April) capturing the imagination, leaving the market at best treading water.

• Jay Powell's hawkish comments that inflation returning to the 2% target range was taking longer than expected - the understatement of the year - are not helping either.

• To be fair, the Fed is trying it's utmost to assuage and temper expectations - just as the macro data indicates that robust growth and sticky inflation (no longer transitory) are rendering the likelihood of a rate cut in 2024 more and more remote. 

It's not as if the economic newsflow hasn't been good. It's more the implications for further rate cuts which the improved economic picture brings - especially in the US.

• Hitherto, rate cut hopes have been propping up risk markets but each good macro print puts a cut further out of reach. For example, reported this week, US consumer spending for March was robust - to say the least, dismissing the notion that the consumer is feeling the pinch, and suggesting that the growth outlook is improving.

  • Sales rose by 0.7% when compared with February, against analyst expectations of 0.3% and they were up 1.1% excluding auto sales versus the 0.5% expected.

• That was further boosted by a solid earnings call from Goldman, whose Q1 results smashed expectations as the group reported some solid retail sales numbers for March. Overall group Q1 profits were up 28% and revenues are up 16%, YoY.

Elsewhere, and in a surprise from China of all places, Q1 GDP beat forecasts with growth registered at 5.3% versus expectations of 4.6% (and 5.2% for FY 2023).

• So far so good and the temptation of the administration will be to hold off any further stimulus measures unless the property rout worsens.

• The driver for the expansion was the export sector while domestic retail sales (+3.1% YoY in Q1, missing expectations of 5.1%) and industrial production (+4.5% in March, versus 7% in Jan-Feb) were both weaker than expected.

This Week in Tech

Reviews of Humane’s AI pin dropped this week, and to put it lightly, it’s looking rough.

• The company was founded in 2018 by former Apple managers Imran Chaudhri and Bethany Bongiorno, and Chaudhri famously claimed that the pin would be a replacement for the smartphone.

• The pin was supposed to be able to answer general questions (like Siri or Alexa), get calendar updates, respond to text messages, and scan objects using its camera to provide information. 

• It fell short almost immediately, falsely answering where the best locations to watch the April eclipse would be during the unveiling presentation in November. 

• Many negative reviews have now surfaced, with the Verge calling the pin “an interesting idea that is so thoroughly unfinished and so totally broken in so many unacceptable ways”. Ouch. 

• We’ll keep an eye on further news of the pin, but don’t go throwing your iPhones away just yet. 

Google has fired 28 employees following a protest against Project Nimbus, a $1.2B contract with Israel to provide the full suite of Google Cloud’s AI and ML tech. 

• There were demonstrations outside Google’s New York and Sunnyvale offices, and protestors also staged a sit-in in the CEO’s office. 

• Nine protestors were arrested and forcibly removed from the offices, in addition to the 28 employees who were terminated. 

• An internal memo was leaked, in which Vice President of Global Security Chris Rackow stated “If you’re one of the few who are tempted to think we’re going to overlook conduct that violates our policies, think again”, indicating the company has no plans to end the contract. 

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

• Tech marketing firm Ibotta, backed by Walmart, raised $577M in an IPO at $88/share. The company opened Thursday morning on the NYSE at $117/share.

• Andreessen Horowitz closed $7.2B for its newest set of funds, with about half aimed for its growth fund. 

• Spend management startup Ramp raised another $150M as an extension of its Series D, led by Khosla Ventures and Founders Fund.

Arch is building 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.