The Breakdown - Layoffs at Block

Episode Date: February 1, 2024

NLW covers the crypto news, including the follow through on some previously announced layoffs at Jack Dorsey's company. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, January 31st, and today we are talking about, well, all sorts of things. Layoffs at the block, ETF updates, SEC news, you know, the usual. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation. come join us on the Breakers Discord. You can find a link at the show notes are going to bit.ly slash breakdown pod. We start off today with a bit of a bummer. Blockchain and payments firm Block Inc. have confirmed

that they've begun laying off employees as part of a previously disclosed downsizing. The company is planning on reducing headcount by 10% by the end of the year, affecting approximately 1,000 employees. Now, the company, which includes cash app, title and Bitcoin Infrastructure Division TBD, had announced plans to reduce its workforce to 12,000 people during a third quarter earnings call. In a leaked memo sent to staff in November, CEO Jack Dorsey explained the plans by saying, the growth of our company has far outpaced the growth of our business and revenue. The size of this week's layoffs was not disclosed, but the company confirmed that its downsizing target hasn't changed. Block, of course, pivoted to an increased focus on Bitcoin infrastructure and hardware

in 2021. The company name was changed from Square and new division's spiral and TBD were launched throughout the year. No details were available on how the layoffs would impact blockchain divisions. Now, alongside the layoffs at Block, PayPal is also planning on cutting its workforce, this time by 9% affecting around 2,500 employees. CEO Alex Chris told staff on Tuesday that, quote, We are doing this to right-size our business, allowing us to move with the speed needed to deliver for our customers and drive profitable growth. At the same time, we will continue to invest in areas of the business we believe will create and accelerate growth. Now, if this seems like a pattern to you, you are not wrong.

Google, Microsoft Activision, Amazon, and Salesforce have also been, begun the year with layoffs. According to Tracker Layoffs.FYI, almost 29,000 tech jobs have been targeted for cuts so far this year. The website lists this January as the worst month for tech layoff announcements since March of last year. Outside of Tech, UPS have announced 12,000 job cuts citing a sharp reduction in package volume during the last quarter. CEO Carol Tomay said, 2023 was a unique and quite candidly difficult and disappointing year. We experienced declines in volume revenue and operating profits and all three of our business segments. Finally, publications including the Los Angeles Times, the Business Insider, and Sports Illustrated have also conducted

layoffs this month. Writes Bloomberg columnist Connor Sen, tough day for layoff announcements. The economy ex-PCE, autos housing, and government has some soft spots. That's just not a very meaningful share of GDP. Now, moving over to the crypto side of things and perhaps a more optimistic assessment of the world, analysts from standard chartered are making the big call that spot Ethereum ETFs will be approved in May. A report from the International Bank on Tuesday said, quote, we expect pending applications for ETH U.S. spot ETFs to be approved on May 23rd, the final deadline for the first of the ETFs under consideration. The bank's crypto research has stood out as consistently optimistic over the past year. Most recently, Standard Charter predicted that spot

Bitcoin ETFs would see between $50 and $100 billion worth of inflows during 2024. This report was no exception with a very bullish price target on ETH. The report said, if ETH prices perform similarly to how Bitcoin prices performed in the lead-up to the Bitcoin ETF approval, ETH could trade as high as 4,000 by that. If that comes to pass, that would be a 70% boost to ETH prices over the next four months. Now, similar to other analysts, Standard Chartered pointed out that there should be no fundamental reason to treat Ethereum differently to Bitcoin. Both tokens already have liquid futures markets traded on the Chicago Mercantile Exchange, and they further noted that

refusal to approve spot Ethereum ETFs would likely put the SEC straight back in court to defend that position. Now, while all of this seems to be that, like an accurate summary of the situation surrounding spot Ethereum ETFs, in other words that the SEC will struggle to find a legitimate reason to refuse the products, most analysts are unwilling to discount the possibility that Gensler's SEC rejects them anyway. Indeed, this is one of the first reports to state so clearly that they expect Ethereum ETFs to be rubber-stamped in May as their base case. Now, speaking of that spot Bitcoin ETF, it looks like the new Bitcoin ETFs are finally beginning to overpower outflows from GBTC. Monday saw $255 million in net inflows on

aggregate, with both inflows into Fidelity and BlackRock products, each outperforming GBT outflows of 192 million. Tuesday's trading session saw BlackRock trading with higher volumes than grayscale for most of the day, but falling just short of claiming the liquidity crown at the close. GBT outflows ticked up slightly on Tuesday, stabilizing at $221 million after persistently falling for more than a week. GBT has now lost $5.5 billion to outflows and 13 days of trading, which is around one-fifth of the fund. In the meantime, the new ETFs have amassed around $6.5 billion since launch, making net inflows around $1 billion. Total volume across all 10 products has now reached 27 billion across 13 days of trading. Currently, the ETFs are doing roughly twice the daily

volume of Coinbase spot Bitcoin markets. Now that the flows are stabilizing, it looks like the Bitcoin ETF market will have at least five large funds and a few smaller products that could stick it out over the long term. 21 shares president Ophelia Snyder said she was confident after seeing the first few weeks of trading, stating, these flows have been really promising. It's one of the best ETF launches of all time. Today's episode is brought to you by Cracken. For far too long, the whole financial system has been standing still, too slow, only on for certain hours, overly designed for some types of people, but not for others. Crypto, at its best, represents progress. It asks the question, what if? It invites people in instead of leaving them out.

It's on 24-7-365 and moves at the speed of real life. Not everyone believes it. we've got our fair share of detractors, but that's the way it always is when you're building something new. Cracken is a crypto company that has been through the highs and lows of the industry, facing forwards towards progress throughout. And now they're inviting us to see what crypto can be. Learn more at crackin.com slash the breakdown. Disclamer, not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures Inc. PVI, DBA, DBA, Cracken. Here's a slightly random one over in Germany.

German prosecutors have seized Bitcoin worth $2.1 billion, the largest crypto seizure in German history. 50,000 Bitcoin were voluntarily sent to wallet addresses provided by authorities. That's a little over half the size of the Bitfinex hack seizure executed by U.S. authorities in 2022. German police operations were assisted by the FBI and a local forensic IT firm. The case relates to two suspects who allegedly operated a German file sharing website in 2013, with the profits converted into Bitcoin.

Investigations into violations of the Copyright Act and money laundering are ongoing, and charges have yet to be filed. No decisions have been made about what to do with the seized Bitcoin at this stage. Now, Bitcoin seized by authorities is beginning to represent a significant chunk of the network. The U.S. government holds $9.5 billion worth of seized Bitcoin according to Arkham data. Earlier this week, a London court heard that Metropolitan Police had seized 61,000 Bitcoin in 2018, in relation to an investment fraud perpetrated in China, meaning that seizure would currently be valued around $2.4 billion. And so, globally seized Bitcoin now exceeds 1% of current supply. Now, an interesting update into how exchanges are evolving.

According to FT reporting, Binance has allowed some large traders to hold their collateral with an independent custodian. Sources claimed that Switzerland's Cignam Bank and Flowbank were participating in this third-party custody program. Previously, even the largest clients were required to hold their assets either on the exchange or through Binance's custody partner, Sifu. U.S. regulators described Sifu last year as a, quote, mysterious Binance-related entity, and it's unclear how much separation, if any, there is between

the two platforms. Now, this shift comes after months of declining volume on Binance surrounding investigations by U.S. authorities. Binance appears to be relenting to the demands of large traders who are still uncertain about the safety of the exchange. The anonymous head of a crypto-trading firm told the FT, quote, I'd much rather park my money with a Swiss bank than Binance. They added that, quote, in theory you're safe for holding your assets with a custodian overseen by regulators. Another anonymous source, the head of a large Crypto Hedge Fund said, my capital should never touch an exchange. They added that using Sifu so far had been, quote, inevitable evil because the alternative is to leave Binance altogether. It works and

the teams are different, but there is a sense that decisions are still made at Binance. The residual risk is it's still the same place. Now, when asked why traders wouldn't just exit Binance entirely, one crypto hedge fund commented, the liquidity is there. And indeed, Binance is still the most liquid crypto exchange despite its problems over the last year. In September, of last year, as panic regarding the DOJ investigation peaked, Binance saw its market share bottom out at 30%. Nine months prior, the exchange had enjoyed a 55% market share. With the $4.3 billion settlement, now two months in the past and remaining legal worries subsiding, Binance volumes have been steadily returning. According to Kiko data, Binance's market share is now back at 49%.

Now, we have a slightly shorter one today just because there is a lot going on and I had to sneak this in between a number of other things. Apologies for that, but I will make it up to you in later days this week, but we're going to end on a fun one. SEC Commissioner Hester Perce has written another scathing dissent this time speaking out against the agency's policy on discussing settlements. This week, the commission considered amending its gag rule, which was enacted in 1972. The rule forbids defendants from denying or refusing to admit the SEC's allegations following a settlement.

A petition to change the rule was brought by the new Civil Liberties Alliance, which challenged it on constitutional grounds. After the commission voted against the rule amendment, Perce wrote that, quote, our prohibition on denials prevents the American public from ever hearing criticisms that might otherwise be lodged against the government, let alone assessing their credibility. The policy of denying defendants the right to publicly criticize a settlement after it is unnecessary, undermines regulatory integrity, and raises First Amendment concerns. Now, the policy is a mandatory term for all settlements with the agency, which is by

far the most common resolution pathway for SEC enforcement actions. Defendants can be hauled back if they breach these terms. When the policy was put in place in 1972, the SEC said it aimed to avoid, quote, creating an impression that a decree is being entered or a sanction imposed when the conduct alleged did not in fact occur. Perce pushed back on this notion, pointing out that the regulator has decades of experience in settling cases where the defendants deny any wrongdoing, adding that, such denials do not seem to have undermined the commission's enforcement program.

She noted that other agencies such as the Federal Trade Commission explicitly allow settling defendants to deny the allegations of wrongdoing. Perhaps most importantly, Perst drew attention to the fact that settlements allow the SEC to push through its claims without them being tested in court. This means the policy grants the SEC, quote, a benefit it could never obtain through litigation, the permanent silence of the defendant.

She summed by suggesting that, a government regulator that is confident in its investigative work, procedural practices, and legal analysis does not need to demand silence on the part of settling defendants. Hotfire, as usual from Crypto Mom, even though it's not about crypto, But as I said, that is going to do it for today's breakdown.

Appreciate you listening as always. One more big thank you to my sponsor for today's show, Cracken. Go to crackin.com slash the breakdown and see what crypto can be. Until next time, be safe and take care of each other. Peace.