Crypto Dips as the Fed cuts!

Well, we had to nuke at some point, didn’t we? It’s fine, I grew tired of A5 Wagyu every day anyway - packet ramen is much better for the soul.

This Week in Crypto

Volatility to both the up and downside this week - we did hit a new ATH at $108,000 and then hit lows not seen since checks notes last month, of $92,300.

• I’ve been sifting through Saylor’s X account trying to see if he was on the bid this week (I don’t think he was). But honestly, it’s hard to find the relevant announcement between all the AI-generated images he has of himself on a Bitcoin Slay and his podcast appearances.

• What is available is their latest 8-K that shows as of Dec 16th an additional 15,350 BTC acquired, leading them to deliver a BTC “Yield” of 46.4% QTD and 72.4% YTD. They now hold 439,000 BTC.

• $MSTR price action indicates he may have been offering ATM, so expect the TWAP to start again shortly.

Flows took a hit this week following Jerome’s somewhat hawkish comments (he also, amusingly, had to clarify the fed is not allowed to own BTC). It’s difficult to interpret this as a fundamental macro shift as some are suggesting though. Ethereum flows were not as exciting but it’s still been whacked along almost all alts against both the dollar and Bitcoin pairs. Solana hit a low of $175.

• Recently airdropped $HYPE has been a notable out-performer and has hit a new ATH of $32.

• Solana hit a low of $175, down 33% from the $265 high.

• Bitcoin dominance rose to 60%, slaughtering most alt coins.

• I’ve barely had time to look at the new PCE (personal consumption expenditures) data that just dropped, but from a glance, it might have saved Christmas!

Crypto equities similarly got nailed across the board:

• $MSTR is down 31.69% (352.21), and $ COIN opened at $262 this morning (down 10% on the week).

• However, a slice of good news, Saylor’s corporate treasury strategy is gathering traction with Marathon raising $1.925B through a 0% convertible to buy BTC. Another miner, Hut8, recently acquired 900BTC for around $100M. Metaplanet also plans to board the train.

  • Let us know if you’d like us to take the time to write an explainer on what these companies are doing here!

And finally, a few noteworthy happenings:

• Deutsche Bank is developing a zero-knowledge Ethereum Layer 2 chain using zkSync technology to enable regulated institutional participation in public blockchain environments.

• Craig Wright, has been found in contempt of court by a U.K. judge (basically for lying about being Satoshi) and will serve a one-year prison term in two years, along with paying €145,000 in legal costs.

This Week in TradFi

Tired of rate cuts yet? Yeah, we didn’t think so.

• On Wednesday, the Fed lowered its key interest rate by 25bps, down to 4.25% - back to the level where it was in December 2022. 

• The Fed indicated that it would likely cut rates two more times next year, as it shifts its focus to inflation. President-elect Trump’s plans for tariffs, tax cuts, and deregulation had the Fed raising its 2025 forecast for inflation and have lowered the chances of additional rate cuts next year. 

• We expect another couple rate cuts in 2026 and one more in 2027, keeping in line with the Fed’s expectation for a “neutral” funds rate of 3%. 

• Despite this, U.S. stock futures dropped today, given the impending government shutdown on everyone’s mind. The Nasdaq looks like it’ll fall for the first time in five weeks, and the S&P 500 is on track to have its worst week since September.

On the international front: 

• Japan’s core inflation accelerated last month, renewing pressure for the central bank to raise interest rates. The nationwide CPI rose 2.7% last month, higher than the previous month’s rise of 2.3%. The data comes after the Bank’s decision yesterday to keep interest rates at 0.25%. 

• European stocks are on track to have their worst week in three months, after stocks fell after Trump’s comments on potential tariffs on the EU. The STOXX 600 index fell 1.1% to a near monthly low and may see its biggest weekly decline since September. 

• The UK had a smaller-than-expected budget deficit last month, with public sector net borrowing at 11.2B pounds, lower than the expected 13B. Expectations remain high for future borrowing, though, as the government plans to improve public services and invest more in infrastructure.

• And oil prices fell by just under $1 today, putting global oil benchmarks on track to end the week down more than 3%. The dollar climbed to a near two-year high, which typically makes oil more expensive for international currencies. Combined with a slower pace of rate cuts signaled by the Fed, slower economic growth could also lead to lower demand for oil. 

This Week in Tech

DataBricks just closed one of the largest funding rounds ever, raising $10B at a $62B valuation.

• Investors include Thrive Capital, Andreessen Horowitz, DST Global, and more. 

• The company’s revenue grew 60% this last quarter and expects to generate positive cash flow for the first time next quarter, with a $3B run rate.

• Naturally, investors were quick to ask about the One Big Question - what about an IPO? 

• CEO Ali Ghodsi explained that he’s waiting on going public until at least 2025, given volatility this year from the election. 

• He indicated that it’s far less important for companies now to go public than it may have been 10-15 years ago. And that makes sense, given the crazy amount of interest the company had for their funding round this year. Ghodsi stated that DataBricks could have raised twice what they ended up raising. 

• Ghodsi was also quick to call out that we may be in an AI bubble (the quickest indicator of a bubble? How much we write about a topic in our newsletter). He said he may even push IPO plans to 2026, depending on how the AI industry shakes out. 

Speaking of AI bubbles (knocking on wood)...

• Google has released a new reasoning AI model, Gemini 2.0 Flash Thinking Experimental. 

• The model is available in Google’s AI Studio and like OpenAI’s o1, it’s supposed to “reason” before it responds, essentially attempting to fact-check itself before responding to a user’s question.

• Google isn’t the only competitor trying to keep up with OpenAI - AI research company DeepSeek and Alibaba’s Qwen team have both launched previews of their own reasoning models. 

• It’s still unclear who will win the AI rat race. But Google’s new model seems like a solid competitor. Everyone’s got their own back pocket question to test out new models, and Gemini 2.0 Flash Thinking Experimental (what a handful to type) has solved at least one person’s test. 

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

• Vacation rental software company Hostaway raised $365M at a $925M valuation. 

• Grammarly has acquired productivity startup Coda, and Coda’s CEO Shishir Mehrotra will become the new CEO of Grammarly. 

• Perplexity AI has closed a $500M funding round at a whopping $9B valuation. Readers may remember that the startup began in 2024 with a valuation of (just) $520M. 

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.