Welcome to BRC’s Breakdown.

A mixed bag. That’s how the previous week was. Not just across asset classes but within in. While 10-year bonds fell, marginally albeit, 2-year bonds rose, marginally albeit. While Bitcoin dropped off, ETH rose sharply.

First, let’s see how the markets fared this week:

Here’s a preview of what we’ll cover:

• Macro: Profits Rise, Rescission Avoids

• Crypto: Staking and Restaking Games Begin

• AI: Google’s AI Language Model Hits A Diversity Blockade

• Week To Watch: India’s GDP Growth at 7% Expected

Macro: Profits Rise, Rescission Avoids

Global equities and crypto continued to rally last week with multiple markets hitting record highs. Chief among them is the Nikkei 225, Japan’s stock market index which is up by 18% in the first two months of 2024.

The tail end of the earnings season saw strong earnings from NVIDIA that helped push stock prices further. The most recent move up in stock prices has been more broad-based with most US equity sectors showing similar positive returns over the last month.

The combination of rising corporate profits, the avoidance of a US recession, and a more friendly US Federal Reserve has created a positive backdrop despite the continued bubbling of geopolitical issues.

Surprisingly, the markets have taken in their stride an adjustment in expectations for US rate hikes to begin later in the year than the March date previously expected.

In crypto, ETH outperformance continues, relative to the broader crypto market and relative to the price of Bitcoin. While there is limited clarity on the criteria for approval of an ETH ETF, outperformance indicates market participants are beginning to price that in. ETH outperformance has also been accompanied by other altcoins like Solana lagging.

Bond yields dropped slightly last week as a see-saw of sentiment about inflation & Fed rate cuts continued.

Staking and Restaking Games Begin

EigenLayer, a relatively unknown protocol on Ethereum, recently raised $100 million from premier technology venture capitalists and rose to a top-5 spot in terms of total value locked (TVL). The reason for this buzz was what EigenLayer does for protocols that want to build on Ethereum, and thus for the eventual customer.

Protocols use Ethereum for – security. This security comes at a cost, the cost of bootstrapping an entire validator. What EigenLayer does is it has built a middleware on top of the Ethereum blockchain to – “decentralized trust” to allow protocols to rent Ethereum’s decentralize trust. This marketplace allows:

• Validators to sell pooled security

• Protocols to buy pooled security

This ability to become more secure has allowed decentralized protocols building on Ethereum and via L2s to set up and scale quickly. Hence, a high amount of TVL has flowed into EigenLayer, via validators re-staking their staked ETH tokens.

Google’s AI Language Model Hits A Diversity Blockade

In an effort to ensure accurate and inclusive representations within its AI technology, Google recently paused Gemini's ability to generate images of people. This decision came after criticism regarding the AI tool's tendency to produce historically inaccurate images featuring individuals of various backgrounds, particularly people of color in historically white roles or settings

Users, particularly those on Twitter, reported that Gemini, Google's multimodal AI model, created images of figures such as the American Founding Fathers, Nazis, and the Pope as members of minority groups. Additionally, the AI struggled to produce images of white couples upon request, suggesting a lack of balance in its output.

Google addressed these concerns, acknowledging that Gemini's attempts to diversify its imagery were failing to account for important distinctions, such as gender in traditionally male roles or cultural contexts. The company stated that it would refine its algorithms to correct these oversights and re-launch an updated version shortly.

This incident follows other high-profile incidents involving AI tools and their handling of sensitive topics, highlighting the challenges faced by developers in creating fair and balanced AI systems. Google's actions reflect a broader trend among tech giants seeking to mitigate the risks posed by AI technologies, especially in light of the ongoing competition between industry leaders.

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