Ten31 Timestamp 818,419
It was a short but big week for US regulators, who finally reached a substantial settlement with massive crypto exchange Binance after years of escalating scrutiny and formal charges earlier this year. The exchange agreed to plead guilty to various violations of the Bank Secrecy Act and pay over $4 billion in fines, while Changpeng Zhao (“CZ”), one of the last remaining charismatic figures of the “crypto” movement of the past five years, agreed to step down from his position as CEO. Regulators also brought new charges against US exchange Kraken, alleging that the company has been market-making in unregistered securities and co-mingling user funds. While we have no position on the validity of any of the charges, guilty pleas, or new allegations leveled by regulatory bodies this week, we’re once again not surprised to see this kind of activity and view it as further validation of our thesis that the only companies with a chance of withstanding growing regulatory hurdles will be those that focus exclusively on bitcoin while minimizing leverage, single-party custody, and rehypothecation of user funds. Whether the defanging of Binance – which appeared to be a priority of US regulators earlier this year – will clear the path for the approval of spot bitcoin ETFs in the US remains to be seen.
It was also a busy week for financial gatekeeping more broadly, including new evidence of transaction filtering by large mining pool F2Pool, Tether’s largest asset freeze in the stablecoin’s history, and the sudden withdrawal of Wallet of Satoshi from US app stores for unspecified reasons (but likely related to current or anticipated regulatory pressure). Meanwhile, the US economic picture continues to look precarious, as leading indicators extended their record-long streak of sequential declines and existing home sales cratered to new 13-year lows – but as the Wall Street Journal suggests, you can always consider selling your kidney if times get tight. With all that as backdrop to this year’s Thanksgiving festivities, we’re thankful this week for bitcoin, the developers and builders working tirelessly to extend it to more people (particularly as permissioned rails and walled gardens become more restrictive), and all members of the Ten31 Tribe helping us support that mission…
Ten31 Timestamp 817,329
Markets decisively reversed course from mid-October woes this week, as the latest CPI reading, which came in slightly below consensus expectations, ignited a short squeeze that sent stock indices back near YTD highs while dampening bond yields on the expectation that macro data now support an end to Fed rate hikes…
Ten31 Timestamp 816,314
Stocks and bonds broadly sustained their rally from last week despite ongoing signs of deterioration in global financial plumbing. The most notable headline from the week was the US Treasury’s especially weak auction of new 30-year bonds, which resulted in the highest tail for a new issue since 2016. The capstone for the week came late Friday, when ratings agency Moody’s downgraded its outlook for US sovereign debt to negative…
Ten31 Timestamp 815,266
Legacy markets got some much-needed relief this week as benchmark government bond yields fell precipitously, the Fed maintained its rate-hiking “pause,” and softer updates on some key macro indicators gave investors reason to believe the worldwide central bank tightening cycle may be close to over. However, lost in the shuffle for many in the stonk casino was the latest quarterly report from the Treasury Department’s Borrowing Advisory Committee, which pointed to rough waters ahead…
Ten31 Timestamp 814,235
Despite ostensibly strong macro indicators through the week – including a GDP print well above expectations, core PCE in line with consensus, and a W/W retreat in US Treasury yields – equities traded poorly, with the S&P entering a 10%+ correction for the first time since October 2022. Meanwhile, bitcoin put up another strong showing, gaining another ~15% after last week’s +10% move (which also coincided with a broad selloff in traditional markets). While it’s far too early to call a “bitcoin decoupling,” we’re once again encouraged by bitcoin’s ongoing resilience in the face of heightened anxiety among investors, particularly coming off a year of very public meltdowns and fraud revelations in the adjacent “crypto” space. Even more importantly, this week exhibited a continued robust pace of innovation from the companies in our portfolio, including exciting new releases from Cathedra, Mutiny, and Coinkite. All Ten31 portfolio companies have remained obsessively focused on iterating and developing regardless of macro noise and bitcoin’s price action, and we expect this to pay significant dividends into bitcoin’s next bull cycle…
Ten31 Timestamp 813,183
In a volatile week filled with headlines across the macro and regulatory landscape, a notable dichotomy continued to take shape: the simultaneously growing acceptance of and resistance to bitcoin among legacy investors and institutions. The first theme was on display in the divergent price action of bitcoin and US Treasury bonds – while Treasuries took another beating on the week with the 10-year yield spiking ~40bps W/W to nearly 5%, bitcoin held its recent range and took a ~10% leg up on Friday. At the same time, the many financial institutions with spot bitcoin ETF filings noted continued progress toward approval, and BlackRock CEO Larry Fink even went so far as to call bitcoin a “flight to quality” trade…
Ten31 Timestamp 812,476
The deluge of “highest since 2007” headlines continued over the past couple weeks, as sovereign debt yields around the world continued to spike to alarming levels. Most notably, the US 10-year breached 4.8% in an upward impulse that ranked as the fastest move since the current rate hiking cycle began, before finally retracing some of this move in the last few days. The ongoing selloff in the bond complex has prompted a variety of stories in the mainstream press about the precarious position of US public debt and interest payments, a stark reminder that deficits don’t matter until suddenly they do.
While the foundational assumptions of the world’s reserve asset were being thrown further into question, the Ten31 team spent the week at our annual portfolio retreat in Utah with nearly 40 portfolio company representatives diving deep on topics ranging from AI and the lightning network to banking, custody, and mining. This year’s event was even more successful than last year’s inaugural retreat and has already led to many synergistic relationships and new opportunities for intra-portfolio collaboration within and across all major verticals of the bitcoin and freedom tech ecosystems. We see the retreat as just the latest example of the power of open networks, where innovations by one company can easily cross-pollinate to benefit a whole portfolio in a way that simply isn’t possible in most legacy investment platforms…
Ten31 Timestamp 810,326
A flood of additional signals of entrenched (and decidedly non-transitory) inflation hit the wire this week, including oil prices making new YTD highs (and getting closer to levels not seen since the US aggressively drained its Strategic Petroleum Reserve last year), record-low housing affordability, and growing upward pressure on wages for domestic auto manufacturers. Meanwhile, government bond yields around the world continued to skyrocket, including new post-2007 highs for most long-dated US issues; at one point in the week, the 10-year yield – generally viewed as the benchmark “risk-free” rate for capital allocation around the world – was up as much ~60bps just since the start of the month. All this was the backdrop to the US national debt surpassing $33 trillion (after eclipsing $32 trillion just a couple months ago) and the federal government coming up on the precipice of yet another performative shutdown. But other than that, markets were generally quiet this week…
Ten31 Timestamp 809,281
Markets shook off much of the optimism that had built up during the summer this week on the back of Fed commentary indicating interest rates would stay higher than previously expected through 2024. The S&P continued its largest drawdown since March, while the 10-year US Treasury yield reached highs not seen since before the Great Financial Crisis. That said, while traditional asset classes have had a rough few weeks, traditional asset managers have only continued to show more interest in offering bitcoin products to their clients, the latest examples of which came this week in the form of new bitcoin custody and investment funds from Deutsche Bank and Nomura. While we don’t expect these vehicles or the many forthcoming ETFs to be the long-term future of institutional interaction with bitcoin, the steady drumbeat of growing interest in bitcoin from legacy financial service players even amid tepid bitcoin price action and wobbly macro indicators serves as one more recent indicator of bitcoin’s staying power…
Ten31 Timestamp 808,299
This week was full of noteworthy macro headlines, the most prominent of which was the reacceleration of officially reported US inflation metrics just a few months after many mainstream economists were running victory laps about the Fed’s supposed success in “taming inflation” without breaking anything in the economy (other than a few massive domestic and international banks). The latest numbers put the Fed in an awkward position as it heads into its next FOMC meeting this coming week, as inside-track reporters had been suggesting the central bank was planning another rate hike “pause” this month. International central banks also had their hands full this week, with China’s huge property sector still teetering on the brink and Japanese government bond yields taking another leg up to decade highs.
Outside the realm of tenured Phillips Curve devotees, the vibrant ecosystem of bitcoin development was again on full display this week at Nashville’s Bitcoin Park, which hosted both Grassroots Bitcoin — an event dedicated to on the ground, grassroots adoption driven by dozens of meetup organizers and small businesses worldwide — and the Human Rights Foundation’s Global Bitcoin Summit, which brought together activists and entrepreneurs from around the world to collaborate on developing bitcoin technologies and solutions for emerging markets, where bitcoin’s censorship and debasement resistance are most desperately needed. As bureaucrats and economists continue to rearrange deck chairs on the Titanic with debates about the ideal pace of savings destruction, this week at the Park was the latest confirmation that the tools and community organization needed to power the next paradigm shift in money are only gaining traction.
Ten31 Timestamp 807,176
The gradual mainstreaming of bitcoin was on display this week. In Texas, bitcoin mining once again exhibited its potential to be a powerful tool for promoting and maintaining grid stability, as miners including Riot Platforms — one of the largest publicly traded miners in the world — made available over 80,000 MWs (enough electricity to power ~100,000 homes for a month) in response to the grid strain of Texas’s late-summer heat wave. Meanwhile, regulators finally updated critical accounting guidance to allow corporations to more accurately reflect the value of bitcoin held on their balance sheets, potentially paving the way for more institutional treasuries to hold bitcoin as a reserve asset. While our optimism around bitcoin has never relied on an expectation that legacy institutions will become hodlers or cypherpunks overnight, we are also not surprised that large energy and financial players are progressively coming to understand bitcoin’s benefits, and we believe we’ll see many more headlines like these over the coming decade…
Ten31 Timestamp 806,208
ETF speculation was re-ignited this week on the back of an appeals court’s decisive ruling in favor of Grayscale in its suit against the SEC over ETF conversion of GBTC. Importantly, the ruling did not imply the imminent approval of Grayscale’s conversion or the approval of other spot bitcoin ETF products and may leave the SEC more avenues to delay such approvals, but the result clearly seems to move the process forward, as evidenced by Bloomberg’s ETF team raising their probability of spot ETF approval by year-end to 75%. While much of the mainstream financial press spent the week analyzing the implications of this court ruling, we note the week’s macro indicators continued to flash red, with both payrolls and job openings data heading south…
Ten31 Timestamp 805,172
While all eyes were on Jackson Hole this week – where updates from Fed Chairman Jerome Powell were fairly minimal – a more obscure but highly noteworthy regulatory headline hit the wire: the Department of Justice filed money laundering charges against two developers of Tornado Cash, an open source, non-custodial cryptocurrency anonymizing service intended to enhance user privacy. While the facts of the case are still coming to light and the Tornado Cash service has no link to bitcoin, we encourage all readers to take a close look at the claims made by the indictment – many of which appear to run counter to established regulatory guidance – and the negative implications that successful convictions in this case could have for open source software distribution in general…
Ten31 Timestamp 804,225
Bitcoin volatility reared its head again this week after several months of sideways or up-only trends. While macro signposts have been flashing warning signals for much of the summer (many of which we’ve mentioned in prior editions of the Timestamp), both domestic and international data points seemed to trend more definitively bearish this week, as US Treasury yields reached highs not seen since 2007 and a slew of headlines out of China pointed to quickly deteriorating financial conditions. Bitcoin’s break to the downside may foretell near-term drawdowns elsewhere in the market – as has been the case with previous drawdowns – but despite the price swings and macro uncertainty around the world, block production continued uninhibited, with bitcoin network hashrate once again marching toward an all-time high…
Ten31 Timestamp 803,113
Major traditional asset classes took another beating in the headlines this week, as ratings agency Moody’s followed Fitch’s lead from last week by downgrading credit ratings and outlooks across the US banking complex. The downgrades, which affected both small and large banks including some household names, cited “particular risks in some banks’ commercial real estate portfolios” as one factor driving the more bearish outlook, and the week offered no shortage of new data points to that effect, including major REITs halting commercial real estate lending entirely while struggling flexible office provider WeWork – which operates ~44 million square feet of space – flagged going concern risk in its latest quarterly filing…
Ten31 Timestamp 802,098
The increasingly unsustainable path of US debt was the prime topic of most financial headlines this week, as the US Treasury’s latest estimates pointed to an incremental $2 trillion of borrowing to come in the back half of the year after adding over $1 trillion in the ~2 months since the latest suspension of the debt ceiling. Ratings agency Fitch downgraded US debt to a still questionable AA+ rating, sending US Treasury yields back toward 15-year highs…
Ten31 Timestamp 801,077
While Congress was holding hearings on UFOs over the past few days, a number of important financial developments hit the wire. In particular, financial gatekeeping seemed to be entering a bull market this week, as we got an avalanche of headlines showing Chase, Mastercard, PayPal, and others all blocking use of bank accounts or payment rails in the latest set of powerful reminders of the importance of permissionless, censorship-resistant money. These instances transcended countries, ideologies, and use cases, highlighting that the transformative value proposition of bitcoin isn’t that it empowers one particular group or political movement, but that it removes the opinions and whims of your banker, card provider, and president from the equation altogether – it is money for enemies. The macro front was very busy this week as well, including another Fed rate hike, the failure of two regional banks, and another surprise tweak to the Bank of Japan’s yield curve control policy…
Ten31 Timestamp 800,060
This week saw a number of bearish updates across several macro indicators, including declining federal tax receipts and retail sales, as well as signs of ongoing stress in commercial real estate. The regulatory backdrop was more mixed, as the week’s most attention-grabbing political headline – Robert F. Kennedy, Jr’s plan to partially back US Treasuries with bitcoin and eliminate capital gains taxes on bitcoin if elected President – was partially offset by news that regulators in Kuwait have banned bitcoin payments, mining, and associated services, apparently at the behest of the FATF. Ten31 Managing Partner Marty Bent has written extensively about the dangers of this supranational body of unelected bureaucrats, and this week’s news out of Kuwait is a reminder of their ongoing influence. That said, it’s also yet another advertisement for the value proposition of bitcoin, a money that fundamentally transcends state or corporate control, as is this week’s ideologically motivated de-banking of prominent British politician Nigel Farage…
Ten31 Timestamp 799,084
The Ten31 team spent the week taking part in the Power of Lightning Summit at Nashville’s Bitcoin Park, which is quickly becoming one of the world’s key poles for bitcoin development and community building. Dozens of the best minds in bitcoin and lightning development, including many representatives of Ten31 portfolio companies, came together for two days of panels, workshops, debates, and emergent discussions centered around the lightning network. Founders and operators from Strike, Fedi, Stakwork, River, IBEX, Oshi, and more all presented or participated in panels, many of which were led by Ten31 Partners Matt Odell and Marty Bent. The event was packed with highlights, but a few standout updates from the Ten31 portfolio included the unveiling of the iOS and Android apps for new Ten31 investment Primal – which also announced it would be open-sourcing its product stack – and the opening of Mutiny Wallet’s public beta to all users…
Ten31 Timestamp 798,121
Major government bond yields around the world spiked to potentially noteworthy levels this week. The US 10 year bumped up against 4.1%, a range not seen since right before the sudden collapse of Silicon Valley Bank. The jump was partially driven by much stronger than expected June jobs data (though as always, the data came with some major caveats) and its potential read through implications for the Fed’s next move, just the most recent example of the late-stage fiat mantra that “good news is bad news for markets.” Across the pond, UK gilt yields rose beyond the range where the Bank of England intervened to save British pension funds less than a year ago. Meanwhile, in a perhaps aptly timed pivot given ballooning volatility in the world’s “risk-free” assets, BlackRock CEO Larry Fink – once a critic of bitcoin as an “index of money laundering” – took time out to praise bitcoin as an “international financial asset” with the potential to “revolutionize finance.” …