Slow Crypto, U.K.'s Growth Pipedream, and Bolt's Debacle

I’m hoping the Wall Street crew are getting over their end-of-summer blues after returning from their Summers in the Hamptons and are gearing up to spend the next 6 months TWAPing Bitcoin. A man can dream.

This Week in Crypto

I’m not going to lie, this week was a real struggle for word count on the crypto front - and the little that we do have isn’t particularly pretty reading.

The Bitcoin ETF saw its largest outflow in several months at -$287.8M, price action has followed tape with Bitcoin hitting $56,000 this morning (likely led by Asian equity markets). Historically too, its worth noting that September has not been a good month for Bitcoin.

• You’ll also notice that Blackrocks ETF saw a small outflow for the first time since May.

The ETH ETF continues to put in shocking performance too… just look at the numbers. It’s difficult to conclude that there is anything other than a severe lack of demand for Ethereum from current institutional investors. While the bulk of the outflows are attributed to ETHE (Grayscale), one must remember that the overhang of supply was much less than the GBTC overhang when the BTC ETF launched (given the numerous forced selling from bankruptcy estates).

• Barring any form of a trend reversal in flows, we continue to be bearish ETHBTC (0.042).

`Crypto equities have similarly performed poorly in recent weeks, with no joy for $COIN holders or those who own any miners. A similar story has been written for almost all altcoin holders of any disposition - meme coins, DeFi, and Solana tokens have all performed poorly.

A few notable headlines:

• Qatar Unveils 2024 Digital Assets Framework

• Coinbase Reports Its First AI-to-AI Crypto Transaction

• Wells Fargo to actively pitch Bitcoin ETFs to clients starting in September

• SEC sues Galois Capital for Custody Failures, Galois Responds

This Week in TradFi

This week’s jobs report showed lower levels of unemployment claims, reducing the urgency for a 50bp rate cut (although, of course not eliminating the likelihood of at least some sort of rate cut later this month). 

• The number of Americans filing new applications for unemployment benefits declined last week, with unemployment falling to mid-June levels. 

• This calms investors who had been worried that rising unemployment was indicative of a coming recession. 

• However, it has reduced the urgency for the anticipated Fed rate cut later this month, with investors now wondering if the Fed will stick with a 25bp cut, rather than 50bp. Financial markets currently put the probability at 41% for a half-point rate cut. 

Worse news on the international front, with multiple countries continuing to experience economic slowdowns. 

• British Prime Minister Keir Starmer stated he wants the economy to achieve annual growth of 2.5%, a rate Britain hasn’t achieved in more than a decade. This would require an additional $1.3T in investment over the next decade, particularly in energy, housing, and venture capital. 

• Germany’s industrial production fell by 2.4% in July, much worse than the expected 0.3% decline. This was fueled largely by a slowdown in the automotive sector, raising concerns that Germany’s economy, the largest in Europe, would contract again this quarter.

And Japan’s consumer spending increased only 0.1% in July YoY, vs expectations of 1.2%. Consumers reportedly spent less on food and utility expenses, despite an increase in wages in July. Furthermore, Japanese economists are saying they anticipate negative consumer spending next month. The BOJ had raised interest rates in July, but plans for further rate hikes are now complicated following this news.

This Week in Tech

Major drama in the tech world has been unfolding the past few weeks, centered around Bolt’s attempted fundraising deal. 

• Bolt had previously raised almost $1B from VCs - with very little revenue - and was now looking to raise a $450M Series F at a $14B valuation. 

• Bolt investors had until end of day last Friday to submit letters of intent for the company’s latest fundraising round, which would include the return of the company’s prior CEO Ryan Breslow. 

• However, investors weren’t told the lead investor’s name, raising questions on whether there even was one. The raise also included a pay-to-play provision, stating shareholders must buy additional shares at the new raise rate or Bolt would buy their shares back at $0.01/share. 

• Breslow then sent an email to investors thanking them for signing off on the deal. However, multiple investors, including Montauk Ventures and Ash Pournouri, are saying they never signed off on anything. Other investors, including Blackrock, have applied for a restraining order to attempt to stop the round, claiming that Breslow was forcing investors to either shell out millions of dollars or lose most of their existing investment (which, if the pay-to-play provision is real, seems to be a true claim!). 

• All this drama comes with an annualized run rate of only $28M - many multiples below the attempted $14B valuation and not nearly enough to be this much of a headache, in our opinion. 

The drama continues with stock market darling Nvidia. 

• On Tuesday, the Department of Justice reported that they had sent subpoenas to Nvidia, in a probe into whether the company violated antitrust laws. 

• Nvidia stock tumbled following the news, taking out almost $280B in market value, the biggest decline in daily market-cap ever. 

• However, on Wednesday, Nvidia responded that they had never received a subpoena (which intern screwed this up?). 

• The DOJ investigation includes a look into the claim that Nvidia makes it difficult for customers to switch to competitors and punishes ones who don’t use their AI chip exclusively, as well as a review of Nvidia’s recent acquisitions of AI startups. 

• Newsletter readers will remember that Nvidia stocks haven’t been doing well since their earnings report last week, and the stock only continues to suffer as news of the investigation grows. 

Lastly, some Friday morning inspiration for those of you thinking about starting a company or building a new product.

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

• Safe SuperIntelligence, Ilya Sutskever’s new AI company, has raised $1B at a $5B valuation, with only 10 employees. Investors include Andreessen Horowitz, Sequoia Capital, DST Global and SV Angel.

• Verizon is buying Frontier Communications for $20B in cash. 

• Lyft is planning on laying off around 1% of its workforce to cut down its bikes and scooters division. 

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.