View from the Arch #4

We hope everyone had a great Thanksgiving holiday! Don’t let anyone tell you Thanksgiving is a slow time for tech. OpenAI & Binance stole the news cycle - luckily the Arch fridge was stocked, and we were well-fueled to keep up with all the craziness:

This Week in Crypto

Thank you to Bitcoin for having me rewrite this whole column after hitting a new yearly high this Friday morning. Ethereum has so far been slightly weaker and sits just under its yearly high. Our view is that Bitcoin will remain strong leading into the next ETF approval window in January. As explained in last week's issue, the GBTC discount indicates the market's predicted probability of approval. It now sits at just 9.7%. High time-frame major resistance stands at $40K-$42K which would be our best guess at a short-term top. However, we wouldn’t be anything other than long and strong across 2024 with it being a year containing a likely ETF approval, the halving and an election year (election years are nearly always green across markets).

The drive this week was certainly helped by news of the DOJ’s settlement with Binance, which Janet Yellen taught us is actually pronounced “Benance”. The headline of the agreement is that Binance has agreed to pay a $4.3B fine and CEO Changpeng “CZ” Zhao will haRichard Tengced as his successor.

Markets hate uncertainty and now seemingly, the sword of Damocles has been removed from atop the market's head. Few existential events or structural supply-side headwinds remain, perhaps only the infamous Gox coin distributions - creditors of which received a hopeful email this week.

Elsewhere, there was no shortage of excitement across the alt-coin market. Blur launched it’s season 3 and an airdrop (make sure to check if you qualify should you be a blur user). It’s the best performing top 100 coin this week, up 102%. We highly recommend keeping an eye on this dune dashboard that monitors Blur vs Opensea performance. NFT volume was a major structural flow last cycle and will likely return during any subsequent period of crypto mania. The key metric to watch here is the distribution of users between the two platforms to see where part time retail folks are shopping for their digital art. Blur could act as proxy exposure to the NFT market (if buying monkey JPEGs isn’t your thing) and will certainly be a coin to watch if it can continue to steal marketshare from Opensea.

As mentioned last week, the Solana airdrops $PYTH and $JUP dropped this week - so do check those out if you have been active on the Solana ecosystem in the past. AI coins continue to be one of the metas at the moment with $TAO (+62%) and RNDR (+25%) performing well. Coingecko has a handy basket to keep track of movements that you can view here. Lastly, anyone bridging to the new wannabe L2, Blast, must be careful since there is no bridge back for at least 4 months. Effectively half a billion dollars of ETH has been bridged (and is therefore effectively locked until a bridge back is released) in anticipation of an airdrop.

Members of the Arch team are also thrilled to see $COIN hitting new yearly highs at $116 in traditional markets. Active readers of our Twitter and newsletter will have heard us banging on about it for quite a while now, and it appears Wall Street have woken up to its potential too. This could have been spurred in part by the SEC's announcement of enforcement against competitor Kraken as well as the Binance settlement. They too, like Coinbase, have signalled their intention to fight the regulator. Miners have also had a green week, historically, of course, acting as a higher beta Bitcoin play accessible in public, traditional markets.

News from Crypto Markets

• Some pieces detailing the deal with Binance and the DOJ can be found from NPR or The Block and Blockworks have a piece on Coinbase CEO Brian Armstrong’s reaction

• Grayscale met with SEC to discuss their spot ETF filing

• Austrian Bank Raiffeisen to roll out crypto trading for retail customers

• Genesis sues Gemini for $689m in clawbacks

• JP Morgan says GBTC could see outflows of up to $2.7bn after the ETF conversion

• South Korea are launching a digital currency pilot with up to 100,000 participants

This Week in TradFi

Heading into the Thanksgiving holiday, the markets generally remain better bid. The push higher may have slowed, but better buyers continue to support risk assets. We think this positive tone will persist into the year-end now, with the macro economic indicators to remain supportive. Equities (the S&P) is a few good sessions away from record highs, rate markets are ignoring any notion that we have the potential for a crippling Federal funding round in 2024 - preferring to focus on the drop in inflation, and credit has regained its luster with corporate bond spreads tightening to an improved tone after a difficult year.

There might be a slowdown in any upside moves versus what we have witnessed through November - a very good recovery month, but the momentum is for a continuation in the rally. Nvidia's results were good, the sharp drop in China chip sales being offset by material levels of growth elsewhere, and this has/will serve to keep the tech sector (which is leading the markets) sought after. What's not to like?

Even Argentina's election of the populist firebrand Javier Milei has led to an initial material upswing in Argentinian risk assets which, ultimately, will feed into a better tone across EM assets generally. Add into the hostage releases in Gaza and we should be trading the current trend. Next up is the Black Friday retail report which might set the tone early through next week. Happy hunting.

This Week in Tech

The Arch team really had to roll up our sleeves and go excavating this week to unearth announcements that got buried amongst the swaths of OpenAI coverage. OpenAI leadership was caught flat-footed like a platypus after impulsively firing its CEO, Sam Altman, which resulted in some knee-slapping commentary:

As is normal, we’re seeing a decrease in venture activity as we approach the holidays and as a result are expecting a flurry of activity in Q1 of 2024. Many growth stage companies that raised massive rounds in 2021 / early 2022 are likely going to be forced to come to market, given runway constraints. We’re expecting an uptick in M&A activity as well. Reports of Petal looking for a buyer emerged this week, and we think we’re just at the beginning of the M&A wave.

Thanksgiving week is typically a lighter week concerning funding announcements, but below are a few fundraises that caught our eye.

Select fundraise announcements from the week:

• Privy raised $18M in Series A from Paradigm

• Truff, the hot-selling condiment brand, has sold a stake of its business to Kim Kardashian’s PE shop.

• Riverwood Capital raises $1.B in capital for its latest fund

Arch updates

• We’ve received tremendous demand for our latest product - thank you for all the support! As a reminder: Arch clients are now able to access institutional BitGo custody with deposits held in their own name. Cold storage at BitGo is insured for the value of up to $250M by Lloyds of London.

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