The most volatile week since 2020

Shades of 2020 this week. Thankfully this newsletter goes out at the end, and not the start of the week, otherwise I’d be writing this note through tear-filled eyes.

This Week in Crypto

We’ve had Bitcoin with a 6 handle and 4 handle this week, which is quite something.

The Bitcoin ETF saw heavy volume this week, but the most interesting thing to note was the slowing of ETHE outflows, which reduced to just $20M yesterday. 

Just some quick color on the markets in general:

• ETHBTC and ETHSOL have been battered. ETHBTC has made a new low after 1000+ days, and ETHSOL has made new all-time lows. Jump crypto exiting enormous ETH positions is a key factor, as well as the ETF seeing continual outflows, although we expect this to taper off with ETHE selling subsiding, as aforementioned.

• With the exception of SOL, BTC is outperforming almost everything, and dominance is rising, including against crypto-related equities. $COIN, for instance, is currently 30% off it’s local high vs only 15% in Bitcoin.

• A picture tells a thousand words (it’s not a pretty picture). YTD performance:

Given it’s halfway through the year too, it’s probably right we revisited our start-of-year predictions which have held up fairly well!

Some other headlines:

• $1.3 trillion asset manager Morgan Stanley will allow advisors to offer spot Bitcoin ETFs to clients

• Metaplanet secured a ¥1B loan to buy more BTC

• Saylor told the world he owns, personally, more than $1B in BTC (no surprises there)

• Putin signs law on legalizing cryptocurrency mining in Russia

Oh, and you might want to stay tuned for the following editions… Arch have some huge announcements coming.

This Week in TradFi

Let’s separate this into two parts. Why did the market nuke, with VIX spiking to the highest level since 2020, and why did it recover, with the S&P gaining 2.3% in its best day since 2022?

Part 1: The Japanese Yen carry trade unwinds, combined with the fears over recession given poor earnings and NFPs that we covered in last week’s edition (it pays to be a reader! Literally!).

• TLDR on the Yen carry trade in the tweet below. Exhuberance around the trade with short yen positions funding long dollar positions (from Treasuries to the most volatile, potentially overvalued equities). They were unwound double-quick in illiquid summer holiday markets.

Part 2: recovery. Japan's Deputy Governor Uchida signaled they won't raise interest rates as previously expected. That decision ensured that the worst never materialized after the massive market sell-off.

• The recovery was boosted by weekly US jobless claims coming in better-than-expected (233k layoffs, down from 250k the prior week) assuaging fears that the labor market might be weakening more rapidly than the non-farm payrolls had suggested - and calming recession fears at the same time. 

We would think the market is set up now for a better bid into the next non-farm payroll data at the end of the month. The market is expecting a big increase in net liquidity over the next 12 months, regardless of who is elected

This Week in Tech

Are you tired of hearing about OpenAI? That’s too damn bad.

Yet another OpenAI employee has abandoned ship - cofounder John Schulman left this week to join rival Anthropic. He isn’t the first OpenAI employee there; he’ll join previous OpenAI safety researcher Jan Leike as well.

• On face, OpenAI seems to have hit a rough patch, with Ilya Sutskever leaving a few months ago in dramatic fashion and current president Greg Brockman going on extended leave. 

• However, revenue continues to rise, with the mobile version of GPT-4o alone bringing in an astonishing $28M of revenue in July. 

Startups aren’t the only ones in rough waters; behemoth Google finds itself in uncharted waters as well: 

• Google lost its massive antitrust case, with a federal judge ruling that its search business “abus[ed] its monopoly power over the search business in part by paying companies to present its search engine as the default choice”. It’s unclear what steps Google will need to take following this ruling, but some of our readers may remember that Google was founded the same year Microsoft lost an equally important antitrust ruling in 1998. 

• Americans are inundated with case decisions every day, but let us be clear: this is not one to ignore. This is the federal government’s first antitrust win against Big Tech in 25 years, with the last win being the aforementioned Microsoft case. 

• Google has promised to appeal the ruling, which will most likely take years. However, in the meantime, Judge Mehta will go into the second stage of judgment next month, deciding on what new rules Google will have to follow to remedy the issues outlined in the case.

• Even if Google manages to overturn this case, the company faces an equally difficult antitrust case against its ad-tech business, which will be heard in the fall. 

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

• Defense tech start-up Anduril Industries has raised a $1.5B Series F, valuing the company at $14B. 

• Fintech company Payoneer acquired HR platform Skuad for $61M in cash(!).

• Techstars has announced they’re laying off 17% of their workforce and ending the $80M J.P. Morgan-backed AdvancingCities program, which aimed to increase funding to diverse founders, at the end of the year. 

STAY TUNED - BIG ARCH ANNOUNCEMENTS COMING SOON.

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.