Stripe's Crypto Foray, US's GDP Disappointment, and Inverse Earnings

It wasn’t the best week of headlines in either Crypto or Tradfi this week, I can’t lie to you… but it also wasn’t all bad!

This Week in Crypto

Given the surfeit of adverse headlines this week, I think price has generally held up okay. For a start, the ETF numbers don’t make for pretty reading…

In addition to the two days of heavy net outflows, Blackrock $IBIT posted for the first time, zero daily inflows. It had a good run though with 71 days of consecutive inflows:

• Out of all registered funds in the US, $IBIT has the second-highest YTD flows - that’s a resounding success!

The first Hong Kong ETFs for BTC and ETH are set to go live on April 30th, although they are not thought to have nearly as much volume as the American Nine did. That being said, most analyst predictions were wildly off on those, with scarcely anyone anticipating the huge inflows we’ve seen thus far. Only time will tell.

Now, onto a couple of pieces of bad news:

• In a blow to financial privacy, the founders and CEO of Samourai Wallet, a Bitcoin mixing service were arrested and charged with money laundering and unlicensed money transmitting offenses.

• This is an incredibly hot topic for Bitcoiners, who don’t see this as a positive development, to say the least.

• For perhaps some more measured takes, I can recommend this tweet which, TLDR, argues that privacy should be defended, but Samourai's alleged encouragement of criminal use warrants criticism.

  • This opinion article in Bitcoin Magazine provides some helpful context.

Also this week, the SEC issued a Wells notice to Consensys informing them of their investigation into Metamask, alleging it is operating an unlicensed broker-dealer.

• Metamask is a self-custodial wallet, we should remain wary against government overreach. In our view self-custodial wallets should be protected under the First Amendment, as after all, they are simply software that allows an easy UI for 12 words in our heads. There’s only one true bearer instrument.

• Consensys also sued the SEC, their founder said: "Today, Consensys took an important step towards preserving access to ether and by extension the Ethereum blockchain in the U.S. We are suing the SEC and fighting back against its overzealous regulatory overreach"

Some slightly better news, however:

• Stripe has ventured back into crypto, announcing that after a 6-year interlude, they are supporting USDC payments at checkout - initially on Ethereum, Solana, and Polygon. The day when you won’t need to offramp to those pesky banks is coming!

• Stripe processed just the $1trn in payments last year alone, so you know, rookie numbers.

And lastly, for some hopium, I’ll leave you this clip of Big Mike shilling us his bags - it’s always a pleasure…

This Week in TradFi

Bad news on the domestic front, with slower GDP growth in Q1 than expected and inflation continuing to rise.

• The Commerce Department reported that GDP increased at 1.6%, vs. an expected 2.4%, the slowest pace in almost two years. 

• Consumer spending increased only 2.5%, down from 3.3% in Q4 of last year. 

• The personal consumption expenditures price index increased 3.4% in Q1, up from 1.8% in Q4 of last year. Core PCE increased 3.7%, much higher than the 2% Fed target. This reinforced beliefs that the Fed won’t be cutting interest rates this summer. 

• Markets tumbled after the news, with the Dow dropping 1% and the S&P 500 dropping 0.5%.

Stagflation, anyone? The 2-year yield zipped through 5% on the data release.

• To think, the futures market was predicting 6 cuts for 2024, back in Q3 2023. The about-turn in expectations has the Fed in a pickle and presents the central bank with a cacophony of problems (cost of deficit funding for starters) as those market rates move/stay higher and US Treasury demand dynamics come under pressure.

It’s also earnings season. Some 30% of the S&P group of companies reported this week.

• Kicking us off, a gamut of bell-weather corporations beat expectations with Pepsico, Danaher, GE, Lockheed, and Philip Morris all in the ascendancy suggesting the broad economy is in good health. That makes it more difficult for the Fed to cut.

• Google achieved a 15% revenue increase and declared its inaugural dividend of 20c/share.

• See more on Tesla and Meta in the section below!

Other interesting trends we’re keeping an eye on:

• UK retail saw the worst sales since 2020, though Easter may be to blame.

• U.S. weekly jobless claims continue to fall, down 5,000 to 207,000 last week. 

• Japan may raise interest rates after forecasts indicate inflation will stay steady around 2% for the next three years. 

This Week in Tech

The Tesla Q1 earnings report came out, and despite bad news across the board, somehow the stock is up.

• Revenue for Q1 came in at $21.3B, down 9% YoY, its biggest revenue drop since 2012.

• However, discussions around self-driving taxis and a promise to release a cheaper electric vehicle clearly pleased shareholders, as the stock surged after hours. 

• Tesla stock was up as much as 16% in after-hours trading on Tuesday and continued to rise through the rest of the week. The stock closed at $170.18 yesterday, up 5% from Wednesday’s close. 

Meanwhile, Meta reported a better-than-expected Q1, but the stock tumbled after a weaker forecast for the rest of the year.

• Revenue for Q1 clocked in at $36.5B, up 27% YoY. Net income more than doubled, at $12.4B this quarter vs. $5.7B Q1 of last year.

• However, Zuckerberg’s announcement on further investments into sectors the company currently doesn’t make money on, such as glasses, mixed reality, and other AI sectors, worried shareholders. 

• Shares dropped 16% in after-hours trading Wednesday and closed yesterday at $441.38, down almost 11% from Wednesday’s close.

President Biden signed the controversial TikTok ban on Wednesday, stipulating that ByteDance must sell its stake in TikTok within 12 months.

• Don’t go downloading all your favorite TikToks just yet. The ban will inevitably invite multiple legal challenges, so no disruption in service is expected in the short-term.  

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

• HR software and payroll company Rippling raised a $200M Series F, led by Coatue.

• IBM is acquiring cloud software company HashiCorp in a $6.4B deal, around $35/share. 

• The Federal Trade Commission has banned noncompetes that prevent workers from joining rival firms.

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.