Huge ETF news , Swifties Spending, and AI Leaders

It’s so over … we’re so back … it’s so over…. we’re so back.

I’m thinking we are definitely so back?

This Week in Crypto

Much to report on the ETFs this week. Firstly, as you can see below we’ve had a week of solid inflows. Like last week, the pattern is still quite odd, as the usual frontrunner, Blackrock’s IBIT, had 3 days of no flows so the numbers were carried by FBTC (Fidelity) and BITB. GBTC again had a couple of inflows too.

• These inflows together with the slightly lower CPI print have helped us recover to be sitting pretty at $65,000.

As we spoke last week, the 13F filings continue to flow in. According to data from Bitwise and Fintel, 937 firms declared Bitcoin ETF holdings as of March 31st. For context, just 92 invested in Gold after it’s first 13F filings in 2004.

Some of the names below include giants such as Millenium, Susquehanna, Morgan Stanley, and the State of Wisconsin (with its pension funds).

• As funds realize Bitcoin, as digital property, is the supreme form of savings technology, this will have the second-order consequence of acting as an additional layer of network security. It makes it harder for adverse regulations such as SAB 121, to pass.

• These are still trivial allocations for the vast majority of these funds, and there is still a ludicrously huge hot ball of money yet to be allocated to Bitcoin at all.

  • Vanguard, which does not offer spot Bitcoin ETFs to its brokerage clients, appointed the Bitcoin-friendly former BlackRock ETF lead as CEO, prompting speculation clients will soon be able to access markets.

Matt Hougan of Bitwise published a memo in light of the filings. TLDR;

• As we’ve covered, lots of professional investors are allocating. But this is also at an unprecedented scale; usually this type of allocation is only seen after a year of new ETFs being launched (see the gold example above).

• The vast majority of ownership is in retail hands (probably around 80%), not institutional hands.

• Professional investors have a longer diligence process. It takes time for them to start allocating in size on behalf of clients.

  • Looking at some of the % allocations above, very few are anywhere near the 1% mark of total AUM. E.g. Hightower’s allocation of $68m is just 0.05%.

    • What happens when many more of these firms allocate much more aggressively?

Some interesting data is provided below, which looks at alt sector performance YTD. It’s worth spending some time looking at the data and the trends of the year so far.

A smattering of other headlines:

• Tornado Cash developer Alexey Pertsev was found guilty of money laundering and sentenced to 64 months in prison.

• El Salvador mined 474 bitcoins using geothermal volcanic activity

• The state of Oklahoma passed a law to protect citizens’ right to hold, spend, and mine Bitcoin

• Pump.fun had an exploit that at first was feared to be $80m, but seems to be much lower at just 1.8m, and is attributed to a former employee.

This Week in TradFi

All eyes were on the April CPI data which officially came out this week! April’s CPI came in at 0.3% MoM vs expectations of 0.4%. Inflation increased 3.4% YoY:

• The primary drivers of the increase were shelter and gasoline.

• While inflation coming in lower than expected is good, this data is not enough to justify a rate cut.

• The Fed will likely wait out the summer to monitor inflation before making any rate decisions.

Higher for longer is currently the sentiment for rates in the US, given inflation’s stickiness. Advancements in AI may prove to be a big secular tailwind in efforts to reduce inflation, but it will likely take more than a year for the impact to flow through the economy.

The UK is still on wait-and-see mode with respect to both the April CPI print which will come out next week, as well as Taylor Swift’s Eras Tour which is expected to bring in over $1B in spending across the UK. If consumer spending starts to weaken, just bring out the Swifties!

While the US and the UK are patiently waiting for inflation to subdue, China is desperately trying to fix their crisis, which is far from over:

• In efforts to contain the property crisis, the government is considering an effort to buy millions of unsold properties from developers. Major property developers’ stocks shot up 40% or more as a result.

China’s monthly "data dump” of economic activity released today. Retail sales slowed down, while industrial production accelerated.

China’s data continues to paint a mixed picture and the government has a lot of work to do to have China hit the target GDP growth of 5%. We’d stay clear from any investments in the region.

This Week in Tech

OpenAI dominated the news again this week, which seems to be a recurring theme. Sam Altman ruffled up feathers when he proposed an alternative to universal basic income (UBI) - universal basic compute, where every person gets some base level of computational resources. Thankfully, the OpenAI team has been focused on LLMs instead of UBI policy. This week OpenAI launched GPT-4o, their newest flagship model, which is multi-modal across speech, text, and images. Its capabilities left the tech world stunned, and it’s fair to say that it’s currently the best model on the market (ending Anthropic’s reign….of 8 weeks).

There were a lot of big personnel movements within the AI world. We finally got the answer to the most asked question in 2024 - “Where’s Ilya?”. While OpenAI’s seems to have a lot of disagreement at the top, Anthropic landed a game-changing hire:

• Ilya Sutskever, co-founder and chief scientist of OpenAI, left this week to work on a new project.

• Jan Leike, co-founder of OpenAI’s superalignment group, left this week as well without specifying his next move.

• Mike Krieger, co-founder of Instagram, joins Anthropic as its Chief Product Officer.

Google also had an impressive set of demos across web and email agents, as well as search. It’ll be exciting to see these products fully rolled out, which could pose an existential threat to companies like Perplexity.

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

• Figma is conducting a secondary sale of up to $900M at a $12.5B valuation to Thrive Capital, Fidelity Management, and Atlassian.

• Accel raised a fresh $650M fund for early stage European startups.

• Fay, a dietitian startup, raised $25M from General Catalyst.

Meet us at Consensus in Texas this month!

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.