View from the Arch #8

Coinbase’s boom, Inflation’s decrease, and Adobe’s scrapped acquisition

December 22, 2023

This is the penultimate newsletter of 2023, we’ve really enjoyed writing these and judging from some of the feedback - you all enjoy reading them! We’re super appreciative of any comments on what you do/don’t like and suggestions for what you want more coverage of!

This Week in Crypto

There was no yearly high this week (don’t whine it’s been up only for months), but we did have another green week in contrast to last week. Last week, the SEC met with various ETF providers to discuss their filing applications. Given the GBTC discount has continued to shrink to a yearly low (around 7.9%) the market seems increasingly optimistic. Weekly reminder that Jan 10th is the deadline, with many floating rumours of sooner approval…

Note that the Mooch is talking about cash redemptions (vs in-kind), and not saying that there is going to be a Bitcoin Cash ETF. The importance of proper grammar, kids.

If I were a betting man (my whole net worth is literally on the line) I’d say the base case is Jan 8-10 for approval at a high confidence interval. But what do I know? My equity curve looks like a slip-n-slide.

Outside of Bitcoin, ETH has shown continued weakness against both BTC and SOL. Solana dex (decentralized exchange) volumes exceeded those of ETH and all its L2s combined, which is quite an astonishing stat. The majority of the volume has been concentrated on airdrop farming (see our previous editions for the list of protocols on SOL with no token) and meme coins (shout out $WIF). L1s were generally the best performing category this week in general with SEI +54%, NEAR +50%, STX +30% and OSMO +24%. It feels like there are early signs of a rotation to ETH DeFi with $ARB and $OP moving in the last 24-48 hours.

In Legacy, it’s been another massive week for Coinbase and Miners, which have been going up faster than shitcoins. To illustrate their beta relative to Bitcoin +165%, these are their YTD gains: Coin +356%, Mara +588%, CLSK +448% (our favourite two miners), MSTR +297%.

News from Crypto Markets

This Week in TradFi

There's little holding back investor appetite for risk. Inflation is falling (some would say plummeting) and central banks are once again behind the curve - 'twas ever thus. And we're into 'everything rally' territory. Rates are dropping (bonds prices higher), and equities are testing, or at, record highs (S&P and Dow, respectively) as central bankers muse - but dare not say that rates have peaked. This was a short cycle and the top in policy rates came quicker and was lower than previously seen.

The system is grappling with a lot of variables but there's too much liquidity in it and as that cash gets to work, risk asset prices move higher. This means that equities are going to be bid for a good while yet. Even the earnings seasons through 2024 are unlikely to derail the upward momentum. Duration is bid only. Gold might hesitate just because we're not seeing a dash for safety.

Geopolitics have been terrible this year, but for many reasons risk hasn't fallen by the wayside. There is massive uncertainty around the US/UK/EU internal political direction. Nothing on that front changes in 2024. So, we close out 2023 with investors in many cases trying to get ahead of the curve. January and February should be good, we anticipate a more calmer March. This year has been great for equities, fixed income has managed to come back off the worst levels and crypto/bitcoin is anticipating.

This Week in Tech

Just as you thought you could sip margaritas in Mexico as the year winds down, Adobe decides to call off its acquisition of Figma due to regulatory hurdles in the UK and Europe. In September of 2022, Adobe announced it would be acquiring Figma for $20B. After over a year of trying to secure regulatory approvals, Adobe decided to terminate the acquisition and pay Figma $1B as a termination fee. With the current regulatory environment in the US, UK & Europe it seems that these mega-acquisitions are off-limits, leaving an IPO as the only liquidity option for a larger startup. Figma is a poster child for tech companies with a reported $600M in ARR, growing 40% YoY. This $1B termination fee will further strengthen Figma’s balance sheet and is more than 3x of the total amount Figma raised from VCs in its entirety. That being said, due to the market correction, Figma would certainly be valued at far less than the $20B acquisition price from last year. We’ll keep an eye on the company as it gears up to file for an IPO.

As the year comes to a close, the Arch team stumbled upon a great review of the year of the Fintech. For the fintech nerds, like us, you can read it here.

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

Arch Updates

  • Arch launches qualified custody access for individuals in partnership with BitGo!

    • Arch clients are now able to access institutional BitGo qualified custody with deposits held in their own individual accounts. Cold storage at BitGo is insured for the value of up to $250M by Lloyds of London.

      • Flexible - Users can trade, stake and access DeFi directly from the safety of their cold wallets.

      • Affordable - This usually costs $12,000 per year, we are offering it for just a one time $500 fee.

      • Read more and start onboarding here

  • Unsafe rehypothecation in crypto backed lending can lead to dire consequences. We've always stated we NEVER rehypothecate your collateral. Here's what that actually means and why it matters to you - Understanding Rehypothecation in Crypto Lending