The Signal: It's Complicated

The Market

A flurry of crypto developments arguably overshadowed what was supposed to be a big week of financial results news from the likes of JPMorgan, Citi and Goldman. 

What Big Banks?

Instead, the largest payment processor in the world, FIS, formed a collaboration with Fireblocks for crypto asset management. Paypal’s CFO and a team of emerging technology staff are no longer with the company. Mastercard fired off a series of trademark filings around crypto, NFTs and the metaverse. And the largest asset manager in the world, Blackrock, confirmed crypto is in their clients’ interest. 

The FIS deal will enable thousands of enterprise clients to access crypto trading venues and decentralized finance (DeFi) applications, accelerating adoption within the financial markets. FIS pointed to a Fidelity study that found nearly 70% of institutional clients wanted to adopt cryptocurrencies for asset management. 

Did Someone Say Asset Management?

As if Blackrock’s ears were burning, the asset management giant CEO Larry Fink confirmed in their earnings call that the company was studying crypto assets and tokenization for their clients. Fink five years ago called cryptocurrency an “index of money laundering”-- so this change could ripple across the industry. His personal views were first floated in a letter to shareholders last month, but confirming in the earnings call that it would be a “benefit” to clients only solidifies Blackrock’s stance.

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The Tech

A Certain Musk

We can’t ignore the Twitter- Elon Musk saga, which took an incredible turn Thursday. The Tesla founder’s offer to take the social media company private at $54.20 per share comes just over a week after he disclosed a major stake in the company and an intent to work with the Board to improve its prospects. 

This takeover offer creates complications for that relationship. The offer price is 30% below Twitter’s February 2021 highs, and ~55% above the price at which Elon made his first purchase in the company. One analyst, Wedbush’s Dan Ives, foresees a “soap opera” ending. It’s hard not to agree.  

One of Twitter’s largest shareholders, Saudi Arabian Prince Alwaleed, expressed his opposition to the deal, and the latest reports indicate that private equity firm Thoma Bravo may get involved with a competing bid. 

One thing to note: Elon has a nearly 10% stake, and has said that if his offer is not accepted, he may “reconsider” being a shareholder – a clue he may dump his shares. That could push shares lower assuming another bidder does not formally emerge. 

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It's Getting Meta

Meta Platforms is also staring down a complicated future. They announced they are steps closer to allowing creators in Horizon Worlds, Meta’s social metaverse that serves their virtual reality offerings like the Quest headset, to monetize the experience. Creators should soon be able to sell NFTs or experiences they have built – but at a cost. 

That cost? Nearly 50%, which is the combined fee due to Meta from any such sales. Given that the Apple and Google stores take a ~15-30% fee, this could be a sign that Meta is extremely confident about the uptake and future adoption in their virtual worlds. In fact, Meta executives maintain the rate is competitive. 

As always, the network effects will be the key: if throngs of users flock to the metaverse with open wallets, creators are unlikely to balk at a 50% charge. Expect debate to be heated and healthy.

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* Domain Money Advisors, LLC, an investment advisor registered with the U.S. Securities and Exchange Commission and an affiliate of Domain Money, is currently recommending the following assets contained in this edition of Domain Money’s The Signal as part of Managed Strategies: TWTR, FB, PYPL, AAPL, GOOGL