View from the Arch #7

Fair Value Accounting for BTC, risk assets rally, and AI startup valuation multiples

December 15, 2023

This may in fact be the first red week for Bitcoin since the inception of the newsletter. Key word: may.

This Week in Crypto

Can I interest you in some tea leaves, ser?

Yes, I know the chart above is not aesthetic, but the indicator pictured is called the Ichimoku cloud - it uses a series of averages to gauge market momentum. If the weekly close candle closes above the cloud, generally that is a sign of a very bullish, trending market. When was the last time that happened? Refer to exhibit A, the orange circle in the bottom left.

Is this any better than predicting price using the movement of the planets? Who knows. But it fits my bias, so I included it.

Anyway, onto some real news - Jpowell and our dear friends at the Fed gave markets some good news earlier this week. See the TradFi section below. Elsewhere, FASB accounting rules are set to go into effect next December. While this is a horrendously boring topic, it basically means that companies who hold Bitcoin and Ethereum on their balance sheet can report uPNL periodically. Prior to this rule taking effect, companies who were holding Bitcoin that had declined below their average entry price had to incur impairment fees, even if they didn’t sell. But, companies would not see any benefit on their balance sheet if the price increased, unless they sold.

A reminder that the ETF decision date is expected for early January, around the 10th. The market is as optimistic as it’s ever been, perhaps given Gary Gensler’s recent comments. The GBTC discount, which if you have read our previous editions, signals via proxy that the probability of approval is at a yearly low of -7.35% (meaning the market is increasingly positive about the chances of approval).

The top performers of the week are split between memes and alt L1 tokens. Bonk (a meme coin) is up +145%. Coins that fall into the latter category include INJ +68%, OSMO +61%, TIA +50% and AVAX +45%.

In legacy, Coinbase is hitting new yearly highs ($154), and miners are enjoying a repricing to the upside as well.

Airdrops are the talk of the town again this week. Because we want you to get free money, here’s a quick guide for a chance to get some (we don’t have any inside information here; it’s just our guess)!

  1. Download the Keplr wallet.

  2. Buy TIA (20) on a CEX (Centralized Exchange). If you want to buy on-chain, use Squid Router to bridge from Ethereum.

  3. Stake it on the Keplr dashboard.

  4. Delegate to a validator outside of the top 10. I recommend ….

  5. Repeat for OSMO (100), ATOM (25), INJ (10), and KUJI (50). Make sure they are all staked. The numbers in brackets are the minimum number of tokens we suggest you buy and stake in order to qualify for airdrops.

Yes, it is a bit difficult and a bit of a pain, but see that as a good thing. The more barriers to entry means the less dilution and a larger proportional airdrop you stand to receive.

News from Crypto Markets

This Week in TradFi

The global rate cycle has peaked. The Fed just nailed it for the risk asset rally - and has effectively underwritten it for 2024. This week’s FOMC meeting was one of the most surprising ones in a while with the Fed far less hawkish than most had envisaged. We're into a fresh easing cycle and it is risk-on! The economy might still be heading for a recession - it isn't in one now, but there is a good chance that the Fed action (admittedly not yet a rate cut) might help stave off such a possibility. The possibility of three rate cuts pencilled in for 2024 suggests there are risks to the downside in growth, after all. The market's initial response post-FOMC was nothing short of euphoric (maybe some relief), and odds are that the S&P will likely see a record high on the back of it, just as the Dow index has. Strap in. There is excitement abound. The start of any year is usually one of hope and expectation thus the sidelined cash will be getting to work early on, not wanting to miss much more of any upside. Q1 2024 should follow what is likely going to be the quite solid performance garnered in Q4 2023. And it might just have saved - or at least added some back-to-performance weakness many (fixed income especially) fund managers would have been sitting on in 2023. Merry Christmas! Into the end of the week, the 30-year US Treasury was homing in on yielding 4%, while just a month ago 5% or more was the call amid a possible funding crisis for the Treasury needing to finance ever expanding fiscal deficits. They've just bought themselves some time. The impact across markets will be palpable. Already, we're pencilling a 1% cut in policy rates in the UK in 2024 and the ECB will have to follow given the dire outlook for German industry, for example. Alas, oil has been shuffling lower, Gold higher, and Bitcoin volatile although off the week's lows. A slowing global economy and recession risks will feed into corporate earnings and might (will likely) temper the rally as we proceed through 2024, but for now, it pays not to fight the Fed.

This Week in Tech

A.I. fundraising continues to dominate the headlines as both Harvey AI and Glean announced massive fundraising rounds. Harvey AI’s new financing values the company at ~$700M, while the company is currently at $10M ARR (for those non-math majors out there, that’s a 70x revenue multiple!). Glean’s new financing values the company at ~$2B, while the company is currently at $30M ARR (~67x revenue multiple). Say it with me — WE ARE BACK!!

Speaking of being back — Apex has confidentially filed for an IPO. Some of you may recall that Apex previously tried to go public in 2021 via a SPAC valuing the company at $4.7B, but the deal fell through. Given that investor sentiment is recovering, this may open the door to a flurry of IPOs this upcoming year. General Atlantic, the private equity firm, has also confidentially filed for an IPO. There are no shortage of technology companies that have been private for so long: Stripe, Databricks, Chime, Revolut, Discord, etc. The boards of all of these businesses are likely keeping an eye on the IPO market as well and may look to seize the opportunity as investor sentiment strengthens.

As always, below are some fundraising announcements and M&A activity that caught our eye: