FTX distributions, Middle East's conflict, and Masa's back!

U.S.’s nonfarm payroll numbers came in hot, further rate cuts are expected, and Masa is back cutting massive checks - what more could one ask for?

This Week in Crypto

Crypto markets reacted poorly to events in the Middle East this week as Iran sent missiles into Israel. Bitcoin is down around 6.7% from its weekly high and $700M in perp longs were liquidated; the highest level since early August.

These events also translated into ETF flows which show a marked difference from last week; Powell’s somewhat hawkish comments may have also played a role here. (see next section for more)

There was also a slew of FUD surrounding FTX distributions suggesting money was going to be paid out starting Oct.1.

As far as we can see there is a confirmation hearing on October 7 in which an effective date will be set. TLDR, smaller <$50k payouts could see funds Q4 2025, while larger claimants will be waiting until at least Q1 2025.

• Many are expecting the liquidity to flow straight back into crypto - being strongly bullish for prices - but given many of the claims have been purchased by non-crypto native hedge funds and distressed asset funds, it makes modeling a concrete number difficult.

• Interestingly, the secondary markets are now paying $1-1.05 for no-preference claims. For context, in the days and weeks following FTX implosions, claims were being traded for as little as $0.05

And finally, a new HBO documentary claims to have discovered the identity of Satoshi Nakamoto. Polymarket speculators believe they will name Len Sassaman.

This Week in TradFi

There’s nothing incredibly exciting to report on the domestic TradFi front, with investors keeping a close eye on the Middle East.

• The S&P 500 remains steady after a massive uptick the last couple weeks following the Fed’s rate cut.

• On the labor market front, the U.S. nonfarm payrolls report came in incredibly strong (254k in September vs 140k expected) and continues to underscore the resilience in the economy. Unemployment also edged down to 4.1% from 4.2%, which are all great signs. However, we have yet to see the effects of Hurricane Helene. Meanwhile, the dock workers strike ended yesterday after reaching a tentative deal. 

• U.S. manufacturing is also holding steady, weakening slightly over the course of the year, but new orders are up and prices paid for inputs are down to a nine-month low, showing signs for a rebound in the sector. 

• And U.S. new vehicle sales fell in Q3, with fewer selling days and slower consumer spending. General Motors reported at 2.2% fall in quarterly sales, and Toyota reported an 8% decline. 

• With all the above paired with Jerome Powell’s tone in his recent comments, it seems like we’re in store for two 25bp rate cuts towards the end of the year.

On the international front:

• All eyes are on the conflict in the Middle East. There aren’t any impacts to the broader global economy quite yet, but we could start to see more if the conflict escalates.

• Oil prices rose 2% yesterday, with concerns that the conflict could disrupt crude oil flows. However, the U.S. has plenty of inventory, and OPEC nations should be able to continue to produce enough to not disrupt levels too much.

• Oil prices are currently at $75/barrel, far below the $84/barrel price last October after the Hamas Oct 7 strike and the $130/barrel highs after Russia invaded Ukraine in February of 2022. 

• Oil prices would need to increase about 10% for Europe to see an increase in inflation of 0.1pp. Meanwhile, economists estimate that an all-out war scenario would increase oil prices to $130 and decrease global output growth next year (currently estimated at 3.3%) by 0.4pp. 

This Week in Tech

OpenAI’s long-speculated fundraising round has finally closed.

• The startup announced it raised $6.6B at a $157B valuation, the largest VC round of all time. 

• The round was led by previous investor Thrive Capital, bringing OpenAI’s total amount raised to a whopping $17.9B.

• Thrive invested $1.3B with the option to invest up to $1B more at the same valuation. Other investors include Microsoft (<$1B), Nvidia ($100M), SoftBank ($500M), Khosla Ventures, Altimeter Capital, Fidelity, and MGX. 

• However, the deal may come with strings attached. The Financial Times reported that OpenAI had asked investors not to back rival startups like Anthropic and xAI.

• The raise is truly an eye-watering amount, but OpenAI needs it - they’ve reportedly spent around $7B on model training and $1.5B on staffing. GPT-4 cost more than $100M to train, and ChatGPT at one point was costing $700,000/day to run.

A Y Combinator startup has come under heat after revealing that it’s a cloned copy of another open-source product.

• PearAI offers an AI coding editor. After announcing the company on Twitter, founder Duke Pan has openly revealed the startup’s product is a cloned copy of VSCode and Continue, which was covered under Apache’s open source license. 

• However, PearAI put its own made-up closed license on the project, which was (are you ready) written by ChatGPT. 

• Changing a license like this is literally illegal. After massive uproar, PearAI followed up with an apology and has now released the project under the same Apache open source license as Continue. 

• Maybe instead of doubling the number of batches they have, YC should focus on making sure their founders understand the law? 

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

• AI software development platform Poolside raised $500M in a Series B, led by Bain Capital Ventures. 

• Toyota added $500M to its original $394M investment in Joby Aviation to help the company ramp up commercial production of its aircraft.

• Tier and Dott, the leading European scooter and bike sharing services, are combining into just one service called Dott.

Arch is building 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.