A Shock ETH ETF, Japan's Rise, and Fundraising Galore!

I’ll give you three guesses as to what we’re going to be talking about this issue…

This Week in Crypto

Well, that was a fun week. Obviously, the big news is the Ethereum ETF approval. This time last week, it wasn’t even on the table. As far as we can piece together, this is the approximate chain of events:

• The Trump campaign pins itself as staunchly pro-crypto.

• Crypto execs lead campaigns to meet the Trump campaign with large donations.

• Biden admin realizes that the set of single issues voters is higher than it first thought - ultimately there are not many voters staunchly anti-crypto.

• The administration scrambles to pivot itself as less anti-crypto (as opposed to pro-crypto).

• Pressure is exerted at the SEC to push through an ETH ETF.

• Ethereum pumps 30%, and adds the whole market cap of Solana, in a single daily candle upon news breaking of an imminent ETF approval.

Note that the 19-4B filings were approved, but S-1 approvals need to come before trading can start.

• There’s not a ton of precedent for this type of situation, so it could take between weeks and months for trading to start depending on how fast the SEC feels like working. James Seyffart of Bloomberg breaks it down on Bankless here.

What are the second-order consequences here?

• The big one is that the regulatory pivot has positive ramifications for the space as a whole in the long run. We’ve already seen this play out this week as FIT21 passed in the house with a wave of Democrat support.

  • Litigation against companies such as Coinbase should subside. Coinbase could also benefit from any stablecoin regulation that comes subsequently, and eventually get the green light to compete with Legacy banking institutions on Wall Street. Take a peak at their pizza van and extrapolate to what their payments business could look like:

Let’s just take a peak at the mega Bitcoin ETF flows this week. GBTC outflows have significantly subsided now as the worst looks to be over on that front, and investors continue to come in predominantly through BlackRock and Fidelity.

Elsewhere:

• UK Bitcoin and Ethereum ETPs will go live on May 28th.

• Coinbase are launching Gold and Oil futures products on their derivative exchange in early June.

• If you need to kill some time with a podcast, Pomp had Strike founder Jack Mallers on - it’s a great listen!

This Week in TradFi

In the US, the S&P Global’s Composite PMI data for April got printed. This data captures activity in both the services and manufacturing sectors.

• Business activity growth increased to its highest point in two years, with the service sector leading the growth.

• Input and output costs rose at faster rates, with manufacturing seeing the bulk of the price growth. However, we haven’t seen these costs fully flow through to end pricing, given that selling prices haven’t increased at the same clip.

While business activity’s been growing, home sales have been decreasing. April’s new home sales data came out and as expected, new home sales declined last month as buyers remain priced out with current interest rates. The US economic data continues to paint a mixed picture, with many financial leaders still believing a hard landing is in store.

While the American and European worlds are looking to start easing, the Japanese are just starting to raise rates.

• In 2016 the Bank of Japan (BoJ) set a below-zero real interest rate to stimulate the stagnating economy.

• In March 2024, the BoJ raised rates for the first time in 17 years to 0%-0.1%

• This week, Japan’s 10-Year government bond yield hit all time highs of 1%, as investors anticipate further interest rate increases.

While Japan is showing signs of finally exiting its “Lost Decade”, many are forecasting that China may just be entering its own Lost Decade with all the economic conundrums. We’ll continue tracking and report back!

This Week in Tech

If this week is any indication of what’s to come - we’re back baby! Nvidia smashed earnings again, venture capitalists are slinging checks, and startups are pouncing on the opportunity. We’ve seen many fundraises this week, with ScaleAI leading the pack with a monster $1B fundraise.

Other companies also want in on the action:

• Groq, a Nvidia challenger, is raising $300M with the help of Morgan Stanley.

• Poolside, an AI company building LLMs to automate coding, is seeking new capital at a $2B valuation with…*checks notes*…no revenue!

While the fundraising market is heating up, the M&A and IPO markets still have a high hurdle for transactions to clear and serve as a stark reminder of the financial performance needed to realize such valuations.

• Oyo, the Indian budget hotel chain, has withdrawn its IPO application for a second time and is now looking for a new round of funding at a substantially lower valuation.

• Snowflake’s talks to acquire Reka for $1B fell apart, likely given the lower revenue relative to the valuation.

• Stability AI has been trying to desperately find a buyer, and Humane is seeking a buyer at a $750M to $1B price-point after its botched pin launch a few weeks ago.

As the LLM wars continue and AI application sectors get more and more crowded, we’re expecting to see a flurry of companies look for M&A opportunities. We’ll keep you all posted on this over the next few months.

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

• Techstars CEO Maëlle Gavet is departing, and co-founder David Cohen will be stepping in.

• Anthropic hires former Airbnb exec, Krishna Rao, as its CFO.

• Valar Ventures raised a new $300M Fund for startup investing, less than half the size of its prior fund.

• ETF Partners raised a ~$300M Fund to invest in climate startups.

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.