Red Bitcoin, European Elections, and AI's Data Struggles

We hope everybody had a happy 4th of July! If you aren’t American, don’t worry - your celebration day will come soon!

This Week in Crypto

I’m sure you all know that the price action this week continued its poor form, with a breakdown from the 100+ day range we’ve been in. ETF outflows have not been a driving force here given the meager flows shown below.

So why are we going down? As alluded to in previous weeks:

• Mt.Gox coins are on the move - 47,228BTC ($2.71B) was transferred to a new wallet this week.

• The German government continues to sell Bitcoin, they’ve sold roughly 9,000BTC so far and have another 40,000 to go. Justin Sun is doing his best to save our bags:

• The US Gov has also been flirting with selling, or at least moving some coins around.

  • Special thanks here to Arkham (see links above) who have tagged these wallets above in an easy-to-view UI.

Miners have been hardest hit by these prices - which actually offers some hope… Typically, miner capitulations mark bottoms as the most inefficient miners, the ones with the oldest ASIC machines and most expensive energy, are forced to sell their coins to prevent going out of business.

In summary, the short-term doesn’t look great with these selloffs. But the longer term looks positive with ETF structural flows continuing, an election (usually preceded by looser fiscal and monetary policy), a crypto political policy shift, and the $10B+ FTX payouts coming to customers (much of which will be redistributed back into crypto).

• We previously anticipated the ETH ETF would be trading this week but SEC comments have pushed consensus back to before July 15th.

• Crypto equities and miners holding more firmly than BTC price action seem to offer corroborating evidence for a positive longer-term view

In other news:

• New Arthur blog dropped - he’s also encouraging people to zoom out. It’s worth a read!

• Robinhood is considering offering crypto futures

• Silvergate settled with the SEC after their probe

• Circle is the first global stablecoin issuer to be compliant with MiCA

This Week in TradFi

The US economy continues to cool with the latest labor data on Wednesday showing that US companies hired workers at a more moderate pace in June and wage growth cooled in private payroll data from the ADP Research Institute. All eyes will be on today’s monthly employment report from the government.

• Fed chair Jereme Powell said in a panel that the recent economic data has shown “significant progress” but needs to see more before changing economic policy.

It seems like the Fed is really waiting to see further increases in unemployment and slowdowns in new job creations. That being said, US equities continue to surge with Tesla and large-cap stocks like Amazon, Alphabet, and Apple leading the charge. The S&P index is up 14.75% in the first half of the year — let’s hope this rally continues into the second half!

The UK and Eurozone are seeing inflation continue to subside, but key elections are ongoing and keeping markets on edge:

• The UK elections are heating up as the Labour parties lead dipped in the most recent opinion poll.

• France’s far right National Rally has been surging and polls are suggesting they may fall short of winning majority seats in the parliamentary run-off election.

We’ll wait to see how these elections play out. Below are other economics news that we’ve been keeping an eye on:

• Eurozone household savings have hit recent highs.

• China’s factory activity shrinks again surfacing concerns about the struggling economy.

• Swiss regulators put UBS under observation amidst concern of growing pricing power after the Credit Suisse acquisition.
  

This Week in Tech

Masa’s back! The man that has been focused on singularity forever has notably sat out for much of the generative AI frenzy, but is aiming to bet big (tens of billions of dollars) in infrastructure, power, and chips!

Masa may have been wise to sit out on much of the generative AI frenzy, given the amount of well-funded companies fighting against each other and incumbents in seemingly every vertical. Almost all generative AI companies are built on top of LLMs from OpenAI, Anthropic, Meta, and a handful of other companies. Given this, it seems logical that the main differentiator and edge for a company would be from its unique and proprietary data set. However, this can be tough to acquire for new startups as we’ve recently seen with Harvey AI, a startup selling AI-powered legal software.

• Reports came out Harvey AI was initially looking to raise $600M and use some of the proceeds to acquire vLex, a legal research firm, to gain access to all of their data.

• Their main competitor Casetext has a huge edge given they were acquired by Thomson Reuters and as a result now have access to enormous amounts of legal data.

• Companies like Ironclad which have been around in the legal tech space for almost a decade also have an incredible edge around distribution and data and are in a prime position to compete.

While this is just one data point it may given an insight into how some other verticals play out. There are three segments of companies in each vertical:

(1) New AI startups

• Companies that are fully AI-forward from day one but may not have an existing customer base or proprietary data set, like Harvey AI.

(2) Tech forward growth companies that have been around for 6-10 years

• These companies may be the best positioned given their tech DNA and distribution advantage with their existing customer base (ex: Ironclad, who has been bolstering their product suite with AI)

(3) Incumbents

• They have the biggest data advantage but may be slow moving and need to acquire AI expertise to take advantage (ex: Thomson Reuters acquiring Casetext)

While this is just one example and it’s still early on, we’ll keep tracking various verticals to see if this is how the AI application wars play out.

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

• Industry Ventures raised a $900M fund for early stage investing.

• Hebbia, a company building AI-powered document search, raised a $100M Series B led by a16z.

• Granza Bio raised a $7M seed led by Felicis to advance cancer treatment delivery.

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.