You’re probably already tired of hearing about it even a few days after the fact, but the story of the week was undoubtedly the midterm Blue Wave that upended the balance of power in Washington, and for more downstream reasons than consensus may fully appreciate. Most directly, a Congress dominated by outspoken adversaries of the White House potentially stands to throw many wrenches into the machinations of an administration trying to accomplish the high-wire act of simultaneous decoupling, reindustrialization, and preservation of dollar hegemony. Readers will have to draw their own conclusions on whether any of those are worthy goals (though even their supporters should probably be able to concede their execution has been uneven thus far), but it’s clearly going to be slightly more difficult to balance all of those priorities if everyone in President Trump’s circle down to the junior staffers is fighting off special counsels and impeachment proceedings for the next two years (change the channel, I think I’ve seen this one before). The caveat there is that the Treasury and Fed are still arguably more important to this agenda than any member of Congress and remain helmed by two figures who seem clearly aligned with the administration’s direction of travel – plus, as we flagged a few weeks back, some senior Democrats are now publicly echoing many distinctly Trumpian talking points on several key issues – but the next moves in an already complex game have no doubt gotten even more complicated.

The other major and immediately relevant effect of the GOP shellacking was the wave of successful anti-data center candidates and ballot measures, most notably Democrat Gina Hinojosa’s surprise victory as the next Governor of Texas, which sent shares of basically every company in an already beaten-down AI complex plummeting to lows that in many cases almost totally erased their YTD gains. We would tend to fade some of the hysteria on this point specifically, given data centers are likely responsible (directly or indirectly) for a good chunk of the industrial impulse that has kept the US out of a recession over the past several years and are a key bulwark of the tacit geopolitical great game playing out between the US and China. Perhaps more importantly for the newly empowered Blue Crew, data centers also represent a golden opportunity for the more Machiavellian elements of the Democratic establishment to rebrand the whole buildout as a boon for American labor unions while using their newfound political weight to lean on hyperscalers and other large supply chain players for a bigger cut of the action (to this point, it’s worth noting that a major data center permitting bill is already seeing a bipartisan push for passage during the lame duck session that will close out this year).

But step back and consider what it might mean if the more radical elements of the party really do get their way here. The bond market perhaps offered an early hint on Thursday, when the Nasdaq posted its worst day since March 2020 and the 10-year could only muster a 5 basis point rally, all with crude having just given back a big chunk of its war premium, which also should have been a gift to the long end. This kind of action raises a series of questions we’ve been pointing out for more than a year: what does a truly stalled buildout do to the “run it hot” strategy? What does that in turn do to debt to GDP, and to nondiscretionary spending as a share of tax receipts? Where does that leave a Treasury complex that is already leaning harder on bills every quarter to fund the deficit, while exhibiting a growing reliance on levered and highly price-sensitive hedge fund buying? Finally, in a world where the Treasury’s reworking of the dollar system has not yet played out, what’s the net impact on rates from all of that, and what would be the reaction function from the Fed and policymakers? With avowed anti-capitalists now in charge of the two most important cities in America, we claim no special insight into which wing of the new majority wins this internal tug-of-war, but we suspect longtime readers can infer why we think hard assets keep a pretty central role in this story, even if (especially if) the Democratic hardliners get everything they think they want.

Selected Portfolio News

Maple AI added Kimi K3.1 Pro to its platform, offering users access to a cheap, private, near-frontier model for agentic coding:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

Giga Energy’s modular approach to data center infrastructure was featured in both TechCrunch and Grit Daily.

Market Updates

Tuesday’s midterms dealt a massive blow to Republicans and the Trump administration’s agenda, with the GOP losing both chambers by a wide margin as Democrats picked up roughly 40 seats in the House and seven in the Senate.

The blue wave ran well down the ballot too, as “democratic socialist” Nithya Raman won the Los Angeles mayor’s race, putting the two most important cities in the US under the control of the DSA.

Markets counterintuitively ripped on the result for one of your classic “bad news out of the way” trades, before totally reversing course on Thursday, when the S&P 500 erased about $2 trillion of market cap in roughly 40 minutes to wipe out the entire post-election rally.

That sent the VIX up more than 70% on the day, its biggest single-session jump since February 2018 (and bigger than anything we saw in March 2020).

The selloff landed on a buyside still licking its wounds from October, with what looks like one of the worst hedge fund wipeouts in years across a variety of strategies, as stock pickers posted their largest active position cuts in over a decade and Lone Pine round-tripped a 40% first half all the way to negative on the year.

Among the many rough results for the GOP, the Texas governorship flipped blue for the first time in over 30 years behind a campaign from Democrat Gina Hinojosa that railed against data centers, driving investor anxiety that the state’s ~90 GW data center backlog (a key pillar of the US’s AI buildout) could be meaningfully impaired over the next few years.

We wouldn’t be surprised if much of this fear proves relatively unfounded, given Hinojosa has explicitly said that all currently permitted data centers will be allowed to finish construction (likely covering most deliveries well into 2028). New projects will have to pay taxes, use union labor, and not raise consumers’ power bills, which seems manageable enough given the political incentives likely skew toward letting the buildout proceed.

But regardless of those nuances, the market is increasingly a shoot-first game, and the battered AI complex consequently closed out the week deep in the red, with the semiconductor index logging its worst day in over six years on Thursday.

And it’s not just Texas, as local ballot measures across the US voted overwhelmingly to restrict data center development, with restrictions passing in every case except one.

Just for good measure, Bernie Sanders piled on by calling for a national moratorium on data centers, though realistically this is never getting past President Trump’s desk.

As a potentially countervailing force, the Senate seems primed to make a bipartisan push during the lame duck session for a sweeping bill to fast-track grid and data center development, a package with the rare distinction of being cheered on by climate groups and the US Oil & Gas Association alike.

But some lenders aren’t waiting around to see how it shakes out, as ING is reportedly shopping a $500 million portfolio of data center loans that includes exposure to Vantage, CyrusOne, and Stargate’s New Mexico site.

Over at the labs – whose economics were already in doubt against the backdrop of decelerating revenue growth and eye-watering valuation expectations – Anthropic’s run rate topped $80 billion at the end of October, a decent monthly step-up, but apparently not strong enough for some major prospective IPO investors to swallow a $1.5 trillion valuation, which now looks very likely unattainable in the near future given this week’s election results.

Buyers now appear to be floating something more like $1.2 to $1.3 trillion ahead of next week’s roadshow, with some weighing as low as $1.1 trillion.

As American capital markets have started to look queasier, OpenAI spent the week deepening its ties to Abu Dhabi, inking four deals spanning government, energy, and sovereign wealth (with UAE investors set to co-lead its new round), the latest evidence of the US AI complex cozying up to non-Iran GCC members.

The first close of that round landed at $11 billion at a $1.25 trillion valuation (down from the $1.4 trillion floated a few weeks back), with OpenAI reportedly still looking to raise another $9 billion and investors likely reluctant to give OpenAI much at that level until they see whether Anthropic can hold that range after its upcoming IPO.

The underlying technology continued to make clear strides regardless of market gyrations, with Anthropic telling prospective IPO investors that its 15-person chip team is already using Claude to speed up chip design, one more data point for the lab verticalization thesis we flagged last week.

Perhaps more consequentially, a new METR report estimated that AI is now making development roughly 2x faster at Anthropic, suggesting recursive self-improvement may be very close.

On a related note, MIT researchers showed a frontier model directly editing another model’s weights to fix its reasoning loops and boost its math scores up to 6x without any gradients or training, which theoretically has implications for frontier economics (though those implications may be positive or negative, depending on your lens).

Amid the carnage, GPU rental rates have continued to moon, with Silicon Data noting that prices are still rising across the board and that whatever the market is fretting about has more to do with the next couple of years than anything happening on the ground right now.

Not everyone is in a hurry for more compute, though, as Goldman Sachs restricted Claude Code and GitHub’s coding tools to engineers only, much to the chagrin of traders who’d been happily vibe coding with the CIO’s blessing as recently as July.

The market doom and gloom was juxtaposed with a much-better-than-expected jobs report showing 165,000 new payrolls in October, though that arguably piles on another headwind if it helps lock in a more hawkish Fed stance.

Interestingly, the 10-year rallied only about 5 basis points amid Thursday’s rout, a pretty tepid bid for the Nasdaq’s worst day since the COVID shock (even if this came on the back of a decent rally over the past month that arguably anticipated some of this chop).

Treasury, for its part, still doesn’t plan to increase coupon sizes for the next several quarters, so it will be relying even more on bills to fund the deficit, an unsurprising extension of the “Activist Treasury Issuance” strategy Scott Bessent criticized prior to his assumption of the big seat.

Oil also sold off hard on the week, with WTI falling below $90 and other key benchmarks declining partly because of a JD Vance Xeet conceding that the unpopularity of the Iran War was the primary cause of the midterm drubbing. Meanwhile, the physical premium in the Middle East all but evaporated after running as high as $30 per barrel for much of the year, as traders positioned for a wind-down of the conflict in the Gulf following the GOP’s electoral rebuke.

While Vance is correct that voters clearly responded negatively to the war, we tend to believe for a variety of reasons that we’re still far from a durable de-escalation in the Gulf – if nothing else, it’s tough to see President Trump (who is, of course, famously conciliatory and humble) conceding defeat with only two years left to define his legacy before he rides off into the sunset (or is dragged there in handcuffs by Democrats).

In any case, China reiterated in coordination with Oman that it wants to see the Strait of Hormuz return to normal as soon as possible, arguably its latest rhetorical hardening against Iran.

The Western hemisphere continues to shape up a bit differently, as Washington and Caracas are reportedly negotiating a long-term American military presence in Venezuela, the latest step in a regional consolidation we’ve been tracking for most of this year.

Tuesday’s results notwithstanding, we don’t see frictions with China abating near term, as the country’s chemical industry has been aggressively ramping exports despite roughly 30% of local producers now in lossmaking territory, with the involution model continuing to spread to industries worldwide, to the growing discontent of countries beyond the US.

American automakers are pushing back on that model, as the industry’s main lobbying group urged Congress to pass a permanent ban on Chinese vehicles before the session ends in December.

German automakers did the same in Berlin, helping drive a sudden reversal from a government that had long been one of the loudest opponents of EU tariffs on Chinese EVs.

Elsewhere in Europe, Poland’s long-running constitutional crisis has spilled over into a fight for control of its central bank. Izabella Kaminska laid out how this whole complicated saga could leave rival claims over the bank and its gold reserves, and in an extreme case even push an EU member state toward dollar rails and stablecoins if euro channels became unreliable, making this a scenario worth tracking as global financial rails continue to get reshuffled.

Bitcoin struggled just like everything else on the week, though all things considered continued to hang in well despite the Binance hack and the massive AI selloff, closing above the 50-week moving average on Thursday (and hovering right around there as of this writing).

Strategy’s STRC preferred also hit par again for the first time since May, ending a 165-day stretch below $100 and potentially clearing the way for the company to restart issuance that could fund more bitcoin buying.

Regulatory Update

House Democrats are apparently looking to advance an amended version of the CLARITY Act next Congress, including a bigger role for the SEC and ethics provisions aimed squarely at President Trump’s digital asset activities.

But don’t get your hopes up, as Elizabeth Warren (Colonel of the Anti-Crypto Army) is set to assume control of the Senate Banking Committee in January.

Lest you think Treasury Secretary Scott Bessent was going to be cowed by this week’s election results, OFAC announced a new round of sanctions on eight Canadian money service businesses with alleged ties to the IRGC after market hours on Friday.

Noteworthy

Paraguayan digital lender ueno suspended the accounts of some 3 million users amid a solvency crisis, with the central bank seizing ueno after regulators found a capital hole tied to insider lending and the fallout now threatening President Santiago Peña with impeachment. As tech trades blow up and political infighting gains ever more attention, events like this are an instructive reminder of the importance of bitcoin’s enduring properties regardless of which way the political winds are blowing.

After months of leaked excerpts, roadshow whispers, and a cottage industry of Substack forensics on a document almost nobody had actually read, Anthropic finally published its S-1 this week. Relative to where sentiment has sat for the past couple of months (which, as we covered a couple weeks back, featured a timeline-wide meltdown over growth slowing to a pedestrian 45% quarter over quarter), the filing came in generally better than feared. As should be expected from what has become history’s largest global Rorschach Test, the skeptics got more than enough fodder to keep them going, including claims of excessively flattering accounting gimmicks, a mind-boggling level of compute commitments over the next decade and beyond, and a conspicuous lack of Q3 disclosure. That said, the company posted operating income in the black for Q2 (even including stock-based comp), positive free cash flow for the half, a cash balance rivaling many sovereign wealth funds, and customer metrics that would make any SaaS CFO blush. Whatever the nuances and forward path from here, we have a hard time believing that the most vociferous Anthropic bears could have conceived of margins and cash generation anywhere near this level at the start of the year.

But at the end of the day, what investors love more than anything is the Mystery Box, the unquantified (better yet, unquantifiable) upside of the hypergrowth story with unconstrained TAM expansion and no signs of slowing down, and a story like that is basically required once we start measuring capex requirements in percentage points of global GDP. As a result, the increasingly frequent kinks in the Lab IPO narratives have, despite many undeniably positive data points for AGI bulls, continued to take the air out of the trade, with the market once again puking anything with a hint of AI exposure this week to close out an already ugly October that included one of the worst hedge fund de-grossing events on record. It’s probably no accident that this is roughly coinciding with the quarter when the hyperscaler cohort has gone firmly free cash flow negative for the first time in a decade, as the market now has to digest external financing demands to keep the wheel spinning (absent an inflection in hyperscaler operating cash flow). But that’s somewhat awkward for many of the themes we’ve been highlighting this year, as the aggressive spending funded by the cash gushers of some of the highest ROIC businesses in history has been a nontrivial driver of the resurgent PMIs and better-than-expected Q3 GDP growth print we saw this week. The calendar isn’t helping either, with the US facing down a hotly contested midterm election on Tuesday: wobbly markets are about the last thing any incumbent party wants heading into a vote, particularly one that could leave a good deal of the administration’s agenda for the next two years at the mercy of a hostile Congress.

Meanwhile, the fiscal ledger leaves a little less cushion for a growth scare than it did last cycle, with debt held by the public now officially past 100% of GDP and net Treasury purchases from the US’s closest allies down sharply this year. There’s more than a little nuance to that last piece, but it’s one more pressure point on the margin for the Coupon Cleanup Crew to manage, and it puts even more of the load on the growth and dollar reshoring agendas to pull their weight. Should those engines start sputtering, we have a pretty good guess which lever gets reached for next, and what that tends to mean for the scarcest assets on the board. As a bit of poetic timing worth considering on this front, this week’s massive Binance hack coincided almost to the day with the FTX implosion that bracketed the last midterm election season (as well as roughly the bottom of the last major market rout), and bitcoin, for all its volatility and long periods of maddening chop, is up ~5x off that period.

Selected Portfolio News

Strike lowered borrowing rates for bitcoin-backed loans worldwide:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

AnchorWatch Co-Founder and CEO Rob Hamilton appeared on What Bitcoin Did to talk through the technical threats facing bitcoin and software more generally in the age of AI agents.

Market Updates

Anthropic finally filed its S-1 this week, and the numbers came in much better than feared on many fronts, including a stronger than expected cash position, positive free cash flow through the first half, and nearly $1 billion of operating income (on a GAAP basis, no less) in the second quarter.

That came on the back of extremely strong customer statistics, including roughly 900% net revenue retention and surprisingly solid user breadth, with more than 11,900 customers now spending at least $100,000 a year against about 950 a year earlier, including strong representation among the Fortune 500 (i.e. penetration beyond the circular VC-backed ecosystem).

But as always in the AI trade, there was plenty for bears to gleefully jump on as well, from arguments that the profitable quarter was temporarily inflated by discounted SpaceX compute and delayed payment terms, to the massive long-term compute commitments which Michael Burry tallied north of $500 billion, to third-quarter numbers that were notably left out of the filing in a move Steve Eisman called “very intentional”.

Anthropic also published an update on its drug discovery partnerships and noted that it has begun drug discovery efforts of its own, the latest sign that the lab is moving toward verticalizing and keeping at least some of its alpha in-house.

The lab’s moat may also be a bit wider than feared, as Artificial Analysis moved to closed benchmarks and found open-weight models falling further behind than it had previously measured, with the top open contender now 12 points off the frontier versus 3 points in the prior version.

Away from the labs, Goldman said it’s seeing clearer signs that AI’s impact is spreading beyond the tech sector, with corporate adoption now showing a statistically significant negative correlation with employment growth, while new research found that productivity trends in the three heaviest-adopting sectors have more than doubled since 2022 even as the rest of the economy has barely budged.

Microsoft seems to have gotten the memo, offering buyouts to around 60,000 employees, more than a quarter of its global workforce, to help contain costs and fund its AI spending.

Meta, meanwhile, followed up its first negative free cash flow quarter in years by heading straight to the equity market, announcing plans for up to $95 billion of stock sales to fund the buildout, kicking off with a roughly $35 billion offering this week (a marked reversal from the buyback machine investors had come to know and love).

Broadcom tapped a different well, with Bank of America, Blackstone, Citi, and Morgan Stanley lining up a landmark $63 billion compute financing, following up on Nvidia’s $500 billion financing platform with Goldman and a who’s who of private capital back in August, the latest sign of a growing integration between Wall Street and Silicon Valley on the buildout as capital requirements reach unprecedented scale.

Lest anyone worry the spigot is running dry, BlackRock’s Rick Rieder said he spent the weekend working on data center debt deals and called this one of the “most exciting investment periods I’ve ever seen,” suggesting the market is still very active despite fears around neocloud credit.

That said, price action this week may free up more of Mr. Rieder’s time for trick-or-treating this weekend, as the market rounded out a brutal October with a violent selloff courtesy of a rough slate of earnings from the bellwethers of the AI trade. Alphabet and Amazon both sold off hard on their prints, and Intel dumped as much as 30% for its worst day in over 50 years, erasing a big chunk of this year’s parabolic gains and helping drive the Nasdaq down 3% on Friday for its worst day since June.

Amid the carnage, OpenAI is reportedly planning to reduce the funding target for its next round by $10 billion, with the valuation now expected to come in at $1.25 trillion off of $1.4 trillion a few weeks ago.

Software and web platforms fared no better, as Google notably said Search monetization slowed on weaker returns from AI Mode, Reddit’s CEO said bluntly that “AI Mode does not drive traffic” for web destinations, and ServiceNow got annihilated on weak earnings for its worst day ever, all of which did little to calm jitters about the durability of software businesses.

China is having an even worse time of it, with the mainland’s AI-heavy STAR50 index now down 40% from its July high, while the domestic auto industry is crashing at home even as exports hold up, hinting at the fundamental dilemma of the country’s involution model.

Yet while markets were dumping tech, the broader industrial picture looked anything but shaky (on admittedly backward-looking indicators), with the S&P Global manufacturing PMI rising to 56, a new high for the year and its highest level since May 2022. Q3 GDP followed suit, beating expectations with growth at 3.4%.

On the fiscal side, debt held by the public officially hit 100% of GDP for the first time since 1946, a milestone that underlines just how much is riding on keeping growth humming.

Foreign buyers provided a bit less support for that burden as well, as Bloomberg reported that Treasury buying from the most US-aligned countries fell 60% Y/Y through the first eight months of the year, though weaker home currencies and higher yields at home are doing much of the work there, and net buying from this cohort is still solidly positive on the year.

Amid the choppy capital markets and higher growth prints, the Fed held rates steady in a 10-2 decision, while Treasury Secretary Scott Bessent interestingly said it would “not necessarily” be a mistake for the Fed to tighten from here.

Not everyone in the Fed system sees much need, as a San Francisco Fed paper pointed to continued disinflationary momentum in PCE (the Fed’s preferred gauge of inflation), with its inflation shock momentum index in negative territory for a fifth straight month.

The 10-year fell back below 5% again this week, though the MOVE Index is still hovering around 100, well above where it sat over the summer.

Down south, Lula unexpectedly won Brazil’s election, sending Brazilian stocks down 25% on the week, though there may be some, uh, irregularities around a last-minute extension of voting hours. In any case, the result marks a significant break from this year’s trend of Latin American countries moving in a Trump-friendly direction, which is particularly noteworthy here given Brazil’s place among the most important players in the hemisphere from a resource perspective.

Shortly thereafter, President Trump repeated that Venezuela could become the 51st state, which would at least make for some interesting neighborly dynamics with the new Lula administration.

Elsewhere on the geopolitical game board, the US reportedly told Gulf allies to be prepared for a “short, intense military campaign” against Iran after the midterms.

While the world waits to see the next move in the US-Iran saga, Russia and Ukraine also kept trading blows amid a partial, tenuous (and maybe nonexistent?) energy ceasefire, with Ukraine hitting another refinery in a record overnight drone barrage just a day after reports that Kyiv had agreed to pause refinery strikes under US pressure.

In the digital asset world, prominent offshore exchange Binance suffered a massive hack, the largest in history at roughly $6 billion. The exchange said it will cover all losses and suspended deposits and withdrawals in the meantime.

Notably, the attack appears to have exploited Ethereum’s complexity via its EIP-7702 delegation mechanism, another lesson in favor of bitcoin’s intentionally simple and limited design.

Bitcoin, for its part, fell below $80,000 on the news and is holding around $77,000 as of this writing. For what it’s worth, Galaxy’s Alex Thorn laid out a variety of reasons to think the bottom is likely in, though we’re hovering just a bit above the 50-week moving average Galaxy cites as a key level.

And don’t look now, but bitcoin hashrate is back near all-time highs despite a massive AI pivot from the large public miners and middling price action throughout the year.

Regulatory Update

The CFTC sued Utah to block the state from enforcing its gambling laws against federally registered prediction markets, with Chairman Mike Selig arguing Congress made the agency the regulator with “sole responsibility” for these markets.

Utah responded a day later by criminally charging Kalshi’s co-founders with promoting illegal gambling, which really rained on the parade of the company announcing its latest round at a $40 billion valuation.

Noteworthy

Google previewed a bitcoin-compatible custody system for banks that can split key shares across a bank’s own hardware, Google Cloud, and a rival cloud, with a broad release targeted for early 2027.

ICE, parent of the NYSE, announced a new collaboration with Trade[XYZ] to bring Hyperliquid-based perpetual futures onshore, endorsed by none other than Stan Druckenmiller in his first tweet ever (as always, we will never fade Druck, but we do think there are some interesting questions worth considering about this collaboration, many of which were also raised in our piece on stablecoins earlier this year).

Coinbase’s CSO pointed 16 AI agents across five frontier models at Bitcoin Core (bitcoin’s main reference implementation) for a week and turned up only two minor issues, which is no doubt nice to hear after several months of basically all legacy software being borked by agent swarms.

More traders became Aware of the Situation this week as the rout in the AI complex accelerated, with neoclouds continuing to face credit concerns and investors getting increasingly queasy that AI-pilled Mag7 CEOs may actually be willing to gulp dilute shareholders to fund their prophesied Age of AI-quarius. There’s plenty to be discussed there, but the headline that stuck with us most came from a decidedly drier corner of the financial world in the form of final OCC rules implementing the GENIUS Act and, most notably, Treasury Secretary Scott Bessent’s celebratory tweet (Xeet?) that marked the occasion by invoking the National Currency Act of 1863. We’ve been arguing for most of the past year that the real ballgame here is moving the world toward a redefinition of the dollar as effectively a spendable T-bill, and Bessent’s reference to an obscure 19th century piece of monetary legislation strikes us as the clearest validation of that thesis we’ve seen yet: the 1863 Act (which, fittingly, is the same law that created the OCC in the first place) provided a framework for private banks to issue a uniform national currency that would be collateralized by government bonds held at the Treasury, effectively making every new banknote in the country a unit of captive demand for Union issuance. It was also, not coincidentally, a wartime measure, which should tell us something about how this administration views the stakes of the game right now, in a week when the White House invoked the Defense Production Act (again) for petroleum products, the Pentagon originated new loans to move pharmaceutical supply chains out of China, Elon Musk’s new chip fab reportedly swore off Chinese vendors entirely, and Beijing extended its export controls beyond critical metals to some finished industrial equipment.

But wait, there’s more! The war-finance machinery that the 1863 Act was part of also went on to fuel a financing boom for the high-tech railroad industry, the most capital-intensive buildout the country had ever attempted to that point. As is generally the case with booms, it was all fun and games until various factors, including a fundamental overbuild of duplicative, uneconomic, and debt-financed capacity, ended the music violently in the Panic of 1873. Intrepid readers who exert themselves may be able to just barely make out some interesting parallels to the present moment in this (admittedly reductive) summary, though of course many key differences may yet emerge (e.g. you didn’t immediately 2x your freight volume or cross-country trips just because the price of rail transit fell 50%; it remains to be seen how that elasticity will play out with on-demand superintelligence). But if this is going to be a meaningful historical analog, we think it signals that paving the way for more credit creation and liquidity to fund strategically important industrial initiatives is going to be a top priority in the near term regardless of buyside consternation about slowing lab ARR, and it shows once again that Treasury policy and industrial policy are increasingly joined at the hip as instruments of American hegemony. Finally, it may be interesting to consider that this rhyming historical episode ended up in the Specie Resumption Act of 1875, in which the US returned its paper money to gold convertibility to help stabilize American credit markets, a feat that required the Treasury Secretary of the day to spend years selling bonds to build up its gold reserve. We therefore imagine that the utility of a stockpile of hard assets during a monetary phase shift like this is not lost on the Treasury Secretary, and we’d also flag once again that his view of hard assets may be more expansive than the market appreciates.

Selected Portfolio News

AnchorWatch announced it is now a Qualified Custodian alongside the launch of its trust company, making it the only multi-institution bitcoin platform offering Qualified Custody:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

Giga Energy published a practical guide to building the business case for a first data center site, covering business model selection, the costs teams commonly undercount, and equipment lead times and partner selection.

Giga also published a piece on building scalable, future-proof data centers out of repeatable modular blocks of power, cooling, and compute.

Market Updates

The Bond Vigilantes’ European revival tour rolled on this week, as France’s 10-year pushed through 5% to its highest since 2002 with the spread to Bunds pushing toward levels last seen in the 2011 euro crisis, with weekend protests and a looming Moody’s decision piling on top of a strained budget nobody in Paris seems interested in addressing ahead of next year’s elections.

Harley Bassman – originator of the MOVE Index that we’ve frequently cited over the years – identified an emerging source of fragility in the US rates complex, warning that the negative convexity of Treasury futures has climbed to levels not seen since 2007, a quirk of delivery mechanics that could force hedgers to shed long bonds into a falling market and turn the selloff into what he called a self-reinforcing “nightmare scenario” if the 20-year crosses 6%.

Duration did get some relief this week, as the 10-year yield posted its largest single-day decline since Silicon Valley Bank’s implosion in March 2023, closing back below 5% for the first time in a month.

The source of that relief was less welcome, though, as the carnage in the AI complex continued all week on mounting investor queasiness about long-term ROI and rising leverage, culminating Thursday in the semiconductor index’s worst day since June.

Meta led the way down after posting its first negative free cash flow quarter in over a decade and unveiling a new class of non-voting shares to raise capital, acknowledging an “increasingly challenging environment for raising capital” as fellow hyperscalers and AI labs all line up for the same dollars.

Despite the stock carnage, on-demand GPU rental prices continued to rip to record highs across the board, with even the six-year-old A100 starting to move higher again after a recent soft patch.

The buildout’s footprint on the real economy also got a little more tangible, with a slew of big company layoffs this week from American Express and Barclays to eBay and Netflix, most of which cited some variant of AI productivity as a driver (whether AI is the cause or just the most investor-friendly explanation is left as an exercise for the reader).

The equity market weakness was a global affair, as China’s CSI 300 entered a bear market on Thursday, down 20% from its recent June peak with chip and AI names leading the way lower.

Seoul also faced its own version of the problem, as South Korean President Lee Jae-myung said his government was weighing additional measures to “normalize” a stock market that has tripped marketwide circuit breakers 10 times this year amid worries about excessive AI investment.

Not helping global risk vibes was price action in oil, which spent the week grinding higher as Houthi attacks on Saudi Arabia escalated to the point that Aramco ordered the evacuation of its Dhahran headquarters, pushing Brent uncomfortably above $100, its highest level since early May.

That’s all despite more oil now coming out of the Persian Gulf than before the Iran war, with Iraq’s exports back near pre-war levels and Saudi and Emirati pipelines, shuttle tankers, and dark transits picking up the slack, though diesel remains below pre-war trend and, crucially, the cost of all those workarounds is doing plenty to keep end prices elevated regardless of progress on total flows.

Washington’s appetite for underwriting all of that may be thinning, as Trump envoy Tom Barrack told nervous Gulf allies in Doha that the old oil-for-security arrangement no longer fits America’s needs and that the US can’t guarantee their security forever, an echo of the President’s message to Europe in Davos early this year that the bill for the security umbrella will move steadily onto allies’ tabs.

Zooming out, the FT made the case that this ongoing disruption is tilting the balance of global oil and gas power toward the Americas, with western hemisphere output on track to rise 10% over two years, while Bloomberg noted that the US now enjoys some of the cheapest crude imports in the world as the global market fragments by geography.

The gap is even starker in gas, where Asian LNG broke above $30 for a four-year high while North American prices sit around $3, arguably a meaningful industrial advantage that should compound over time (which may be relevant if you’ve decided the only way forward is reshoring).

And in perhaps the clearest sign of the times, Qatar, until recently the undisputed LNG export juggernaut, signed a deal to buy 4 million tons of US LNG every year through 2054 with part of its own Ras Laffan capacity still knocked offline.

Up north, Alberta voted to remain in Canada by roughly a three-to-one margin after separatists spent months feinting toward secession, keeping the hemisphere’s other energy heavyweight in one piece for the moment.

Closer to home, President Trump invoked the Defense Production Act once again for petroleum production, refining, pipelines, and storage, declaring the whole chain essential to national defense and citing “constrained financing” and “long lead times” among the bottlenecks to fix.

Diesel also seems to be greasing the wheels of diplomacy further east, as Vladimir Putin proposed a meeting with President Trump and Xi Jinping to hash out an end to the Ukraine war, floated on the same October 9 call that produced the US deal to buy Russian diesel.

Things looked like they were moving quickly from there, with a new Trump peace plan reportedly including a demilitarized zone in the Donbas, sanctions relief, and resumed Russian gas flows to Europe via Nord Stream, while the Kremlin said Russian and Ukrainian militaries were working out ceasefire dates for a local evacuation. If any of it sticks, it would carry real implications for the diesel and broader energy picture, though given how last week’s “energy truce” went, we’d probably keep the champagne on ice for now.

Beijing, for its part, kept turning the screws on Western supply chains, extending its export controls beyond refined critical metals to specialized industrial equipment like tunnel boring machines, a market in which Chinese manufacturers have gone from zero to 60-70% share over two decades.

Washington is working the other side of that ledger, as the Department of War made a conditional $80 million loan to onshore production of key pharmaceutical ingredients, part of a broader push to reduce dependence on a Chinese supply chain that accounts for over 40% of the starting materials reaching American patients.

Elon Musk’s Terafab is apparently taking the same memo seriously, reportedly excluding Chinese suppliers entirely in favor of Korean vendors as American semicap juggernauts Lam Research and Applied Materials stand up dedicated Terafab teams for a facility targeting 100,000 wafers per month before 2030.

Elsewhere in what Washington hopes will be a resurgent domestic chip industry, Intel CEO Lip-Bu Tan said it’s “always very important” to have strong government involvement supporting the foundry business to make it viable long term, noting it took TSMC 10 to 20 years to get where it is today (with no shortage of government help along the way).

The administration’s appetite for wiring Americans into the capital markets keeps growing as well, as Brad Gerstner is reportedly pushing to expand Trump Accounts to anyone under 40, which would add roughly 100 million people to the program (and, not for nothing, some incremental price-insensitive bids for US equities).

Against an increasingly volatile backdrop, bitcoin has been fairly rangebound over the past month, but IBIT nonetheless pulled in $665 million on Monday for its largest single-day inflow in over a year – though the ETF complex gave back a similar ~$636 million on Thursday, its largest daily outflow since June.

Meanwhile, BlackRock filed for a “buffer” bitcoin ETF that trades away some upside for downside protection, the latest product in the asset management giant’s growing portfolio of bitcoin-linked offerings.

Prospective buyers of this ETF may want to check out JPMorgan’s latest long-term capital market assumptions, which have bitcoin as the highest expected return asset on the table, though also with much higher expected vol, even as new Grayscale research showed the orange coin’s one-year realized volatility has fallen to 43%, lower than roughly a fifth of S&P 500 constituents.

Regulatory Update

The OCC finalized its GENIUS Act rules, notably dropping its proposed restrictions on stablecoin rewards and leaving the yield fight between banks and digital asset firms unresolved for now (the agency will review arrangements case by case; billable hours remain the undefeated champion of the world).

Treasury Secretary Bessent celebrated by explicitly invoking Lincoln’s National Currency Act of 1863 as the precedent, arguing that the GENIUS Act does for payment stablecoins what that law did for bank-issued currency.

New York and Wyoming, two states not often mentioned in the same breath on digital asset policy, agreed to link up on oversight with an MOU to share supervisory information, coordinate exams, and fast-track licensing for firms with a clean track record; however, this will not include automatic reciprocity, so a Wyoming license still isn’t a free pass in Manhattan.

Noteworthy

The internet faced a massive set of newly disclosed vulnerabilities – unearthed by, you guessed it, the latest AI models – in core PHP, the language behind roughly 70% of the world’s websites, with unauthenticated remote code execution possible across every PHP version of the last decade.

Shortly thereafter, new reporting indicated US banks are detecting unauthorized third-party AI agents operating inside customer accounts, with some taking actions that appear to be independent of user instructions (though it’s not totally clear how accurate this characterization is).

And just for good measure, Quest Diagnostics, which serves roughly half of US hospitals and physicians, was also hacked, exposing patient data.

To close on a more uplifting note (for everyone but goldbugs), strides are being made in the alchemy game, as Marathon Fusion said it transmuted mercury into stable gold using fusion neutrons at 10x the record CERN set last year, though the real prize is scarce medical isotopes. We will keep readers posted should any reactor figure out how to transmute anything into more bitcoin.

The ever more frequent We’re Back / It’s Over cycle reached its latest local nadir this week, as the timeline got flooded with a slew of “Black Monday incoming” posts as the S&P crashed to roughly, uh, 2.5% below its all-time high. The culprit this time around was an Anthropic pre-IPO roadshow that revealed growth slowing to a mere 45% quarter over quarter, which was enough to induce some long-awaited victory laps from deep value investors who’ve been making bubble calls since NVDA was at $30, while nuking anything with a hint of correlation to the AI supply chain and spiking the nominal cost of neocloud default protection to levels that, at face value, would imply better-than-even odds of a default within five years. The sheer volume of exuberant doomposting from accounts whose AI experience seems limited to free tier ChatGPT makes us suspect that the top is in fact not yet in, but this is no doubt a historic capex cycle funded increasingly by borrowed money and “creative” financing packages, so the heightened volatility on even a whiff of deceleration isn’t entirely surprising (even if there’s a fair argument that at least some of the Anthropic slowdown might have been driven by recent efforts to crack down on distillation, which, if successful, could set the stage for more meaningful tailwinds in the medium term).

But price action in the bond market might actually have been more interesting, as the 10-year looked at a hot CPI print and a record monthly jump in wholesale goods prices only to finish the week substantially lower anyway, while no less than three Fed officials took turns explaining why there’s no particular rush to tighten rates further. Fed Chair Kevin Warsh, meanwhile, was tight-lipped on near-term Fed policy but had some notable meta-commentary on the overall system, including praise for a more synchronized tightening cycle among the world’s central banks that leaves “no free riders,” which if you squint looks rather like the anti-Eurodollar direction of travel that’s been emanating from the Treasury all year (perhaps not surprising given the self-declared house making it clear back in August that the two institutions would “work together” on US debt management while expressing confidence that his fellow Druckenmiller alum will “do the right thing”).

That growing alignment may become even more important in the coming months, as it seems like the AI question resolves in one of two ways from here. If the buildout carrying so much of the administration’s plan runs into a hard wall of financing capacity and physical resource constraints (and the AI bears have a point that extreme diesel tightening, heightened kinetic tension around the Middle East, and weaponization of critical minerals are not helping the bull case), volatility will go nonlinear and someone will need to engineer a creative backstop, which is materially easier with the Fed and Treasury rowing in the same direction. If instead the doomers are early yet again and a once-in-a-century technological shift steamrolls these concerns for a while longer, that buys the US cover to keep rebuilding the dollar system around the Treasury (a project that looks increasingly likely to outlive this administration, as we now have senior House Democrats sounding more or less like President Trump on China and Europe), which would be an outcome that we’ve long argued moves in a strongly pro-liquidity direction. Timing the exact peaks and valleys in a credit cycle is not our game, but we don’t think readers need to call the precise event path here to see that both branches end up somewhere pretty constructive for bitcoin.

Selected Portfolio News

Strike cut rates on its bitcoin line of credit product for both new and existing customers, letting users draw cash against their bitcoin without selling it:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

Giga Energy CTO Angad Sandhu published a piece in Data Center Dynamics about the company’s modular construction strategy, which aims to bring HPC capacity online cheaper, faster, and at higher quality.

Amid questions about AI’s long-term impact on cryptographic security, AnchorWatch Co-Founder and CEO Rob Hamilton published a breakdown of the five open mathematical questions that would need to be answered for any classical algorithm, AI-assisted or otherwise, to weaken bitcoin’s elliptic curve cryptography.

Unchained Co-Founder Dhruv Bansal joined What Bitcoin Did to discuss why AI agents that need to pay for compute, bandwidth, and storage would ultimately prefer to transact in bitcoin.

Market Updates

Because the market is increasingly just one big pod shop, everyone hit the panic button this week after Anthropic’s third-quarter numbers pointed to decelerating growth, even as revenue grew 45% from the prior quarter to nearly $17 billion (the junk credit rating, admittedly, did not help the optics).

Some of that slowdown may have been by choice, as the lab said it has meaningfully clamped down on what it characterized as distillation attacks by Chinese AI labs, cutting the data they could harvest by as much as 90% to 99% and turning away “meaningful revenue” in the process. If those measures prove successful, that may have real implications for how quickly open-weight models can keep closing the gap with the frontier.

Regardless of the qualifiers, most of the AI value chain got smoked on the sentiment hit, with the neocloud complex selling off particularly violently as CoreWeave’s five-year CDS blew past 1,100 bps (though it’s worth noting that CDS can gap wider on a rush of hedging demand alone, so we’d be careful reading it as a sign of an imminent blowup).

Levered operators across the AI supply chain got hit hard as well, while default protection on Oracle and even the hyperscalers continued moving to record highs. The broader market got whacked right along with them, with semiconductor weakness dragging the S&P 500 to its worst week since June.

BlackRock CEO Larry Fink, for his part, warned that a moratorium on data center construction (the threat of which has become a real headwind for the buildout) could tip the US into recession, a fairly candid acknowledgment of just how important this one trade is to everything else.

Not helping sentiment were the much hotter inflation updates, with PPI coming in dramatically above expectations at +6.3% Y/Y against 5.4% expected and final demand goods jumping 2.6% in a single month, the biggest increase on record.

Stripping out energy brought the annual figure down to a still-hot 5%, though BLS noted that almost half of the increase in processed goods prices came from much higher diesel prices. At the same time, September CPI came in above consensus on both headline and core.

Underneath the hot prints, the consumer looks a bit wobblier, as gas station spending rose 24% Y/Y and accounted for nearly all of the growth in consumption, leaving retail spending outside the pump growing at its slowest pace in two years.

The lower end of the credit spectrum is also stretching to keep up, with more than 30% of subprime auto loans originated in the first half of this year not scheduled to be paid off until the 12-year mark (up from 7% at the end of 2019).

Interestingly, the hot CPI print initially caused the 10-year to spike back above 5.3% before a massive intraday reversal landed it closer to 5.1%, and PPI the next day only pushed it lower, with the benchmark yield closing out the week a bit under that level.

Against the backdrop of a swooning AI complex and hotter inflation, Fed Governor Christopher Waller insisted that the surge in yields reflects growth and capital competition, with long-term inflation expectations still well anchored.

New York Fed President John Williams similarly said he sees one more hike this year as appropriate but no need for further hikes in 2027 (a notably specific roadmap for a Fed that has ostensibly sworn off forward guidance).

Going for the jawboning hat trick, Vice Chair for Supervision Michelle Bowman indicated that while inflation is above target, she sees no urgency to get aggressive, while also reiterating the point she’s been making for a couple of years (right alongside Treasury Secretary Scott Bessent) that too much credit creation has been pushed out of the traditional banking sector and that capital requirements and other rules should be eased to bring it back.

Fed Chair Kevin Warsh, meanwhile, declined to tip his hand on an October hike but welcomed the synchronized tightening around the world as an indication that there will be “no free riders” going forward.

On the energy front, the IEA now expects the global diesel shortage to last well into next year, with inventories unlikely to recover until the back half of 2027.

The Gulf did its part to keep things tight, as a Houthi missile hit Riyadh’s main airport in the deadliest attack on the Kingdom in a decade, increasing concerns about a widening conflict. The group followed up days later by striking Aramco’s headquarters and vowing more attacks on Saudi airports and oil facilities.

That threat looked like it may have materialized late Friday, when Brent ripped above $109 on still-unconfirmed reports that Yanbu or the East-West pipeline had been targeted yet again, though satellite imagery shared early Saturday appears to show tankers at the port actively loading.

Traffic through the Strait of Hormuz has proven sturdier than the headlines might suggest, with average daily oil flows running above 12 million barrels so far in October, ahead of September’s pace, even as 26 vessels came under attack this month (more than 9 million of those barrels are moving under direct US military protection).

Yet despite everything, implied US oil demand is sitting at a five-year high for this time of year (is the demand destruction in the room with us right now?).

The pain is landing considerably harder in Tehran, where the IMF now sees the Iranian economy shrinking by 7.6% this year, its biggest contraction in nearly 40 years.

Further north, President Trump announced an “energy truce” between Russia and Ukraine, which was apparently news to Ukrainian President Volodymyr Zelensky. The truce followed close on the heels of Trump’s diesel deal with Putin, which opened a new rift with Europe and drew a pointed response from Zelensky that “gifts to Putin will not lead to peace,” as both attacks and acrimony ramped up on the back of it.

Escalation continued all week regardless, culminating Friday in Poland scrambling fighter jets as Russia struck western Ukraine and drones hit cargo ships in the Black Sea, adding even more uncertainty to the global energy backdrop.

After the close on Friday, Trump proceeded to waive many of the sanctions in the Lindsey O. Graham Sanctioning Russia and Iran Act, the bipartisan bill he signed just last month, two days before they were due to take effect.

Despite recent chest thumping on both sides of the US’s northern border, Canadian Prime Minister Mark Carney pledged to “continue to maximise” the country’s oil and diesel exports to the US, with diesel alone running well over a million barrels per day.

Elsewhere in the rapidly shifting international trade picture, Trump publicly linked potential tariff cuts for South Korea to its $150 billion US shipbuilding pledge, speaking at the launch of a new Maryland shipyard in which he said US taxpayers will hold a 40% stake.

The House Select Committee on China urged DHS to revoke COSCO Shipping’s privilege of facing fewer inspections at US ports, alleging the state-linked shipper’s vessels have been conducting espionage near American coastlines.

Beijing’s export machine has continued to rip regardless, with September shipments up 36% Y/Y against expectations for 26%, though those flows are increasingly overweight Europe, which may be contributing to the recent hardening of anti-China sentiment among EU leaders.

In response, Berlin will reportedly press EU leaders to quickly put quotas on more Chinese imports, from chemicals to pharmaceuticals, following last week’s joint “kill switch” proposal with Paris and a record EU trade deficit with China in September.

China also appears to be aggressively diverting exports into emerging markets as an offtake valve for its industrial model, though transshipment hubs like Vietnam and Mexico look especially strong, suggesting some of that is likely still finding its way into the US.

The picture inside China’s manufacturing base continues to look wobbly on some key fronts, as the Wall Street Journal detailed a growing debt spiral with exposure to an increasing share of unproductive projects, and the latest data show that more Chinese industrial firms are losing money than five years ago.

Perhaps tellingly, Beijing moved to support its stock market with selling curbs and liquidity injections, a playbook it has reached for more than once over the past decade.

At the same time, a new analysis from Bloomberg this week suggested that China might have been using Canada to quietly accumulate as much as $600 billion in Treasuries, which would pose a noteworthy potential challenge for the received narrative of rapid diversification away from US obligations.

In a very notable data point for any asset managers with their fingers crossed that all of this disruption is just a Trump-specific phenomenon, House Intelligence Committee Ranking Member Jim Himes (whom you’ll note has a “D” next to his name) sounded a lot like the President this week, arguing that Europe needs to shoulder far more of its own defense burden and that no one should expect Democrats to unwind Trump’s trade policies.

Bitcoin held up surprisingly well amid the AI carnage and a wall of concerning energy headlines, dipping below $80,000 for the first time since mid-September before quickly recovering to $82,000 and settling back into its recent range.

Regulatory Update

White House Crypto Council executive director Patrick Witt – who had a lead role in pushing for the CLARITY Act and other digital assets initiatives – stepped away from the administration this week. It’s not immediately clear whether his position will be filled.

Noteworthy

Lightning Labs introduced LayerTree, a covenant-based scaling proposal in which a single bitcoin UTXO can hold the balances of potentially millions of users in an off-chain Merkle-sum tree, letting any user exit on their own in a single transaction with no timeouts and no need to be online to receive funds (though it relies on opcodes that aren’t yet active on bitcoin).

Anthropic’s Frontier Red Team traced the origins of the long-mysterious seeds behind the NIST curves used in ECDSA (the widely used signature standard behind bitcoin and many other systems), offering additional confidence that those curves weren’t deliberately backdoored.

The so-called Bond Vigilantes have spent the better part of two decades as the Bigfoot of the fixed income world (plenty of grainy footage, never quite a confirmed sighting), but anyone looking for proof of life this week had to look across the Atlantic, where French spreads to German bunds have blown out faster than they did at the height of the 2010 Greek crisis while the leading candidates to succeed President Macron spent the week proposing solutions like lowering the retirement age and imprisoning the head of the country’s central bank. This all unfortunately looks a lot like the latest symptom of Washington’s ongoing rugpull of 40+ years of post-Cold War orthodoxy about the Rules-Based Order^TM, glimpsed early this year at Davos and followed swiftly by an expansion of the Donroe Doctrine, an aggressive reshoring push, allies getting stuck with more of the bill for their own defense, and so on. This transition was always going to hit the weakest links in the Western alliance first, and Europe checks just about every box on that front: worse energy sovereignty than the US, similar or worse debt loads, generally inferior capital markets depth, and an even more generous welfare state sitting atop still grimmer demographics. When squeezed hard enough on energy and sovereign funding costs, “middle powers” in this arrangement will eventually have to pick a side between the available spheres of influence, and this week brought some pretty clear evidence of which way the continent is trending, as Paris and Berlin – which until recently sat at opposite ends of the EU’s China debate – jointly sent Brussels a proposal for a trade “kill switch” that could cut China out of the single market altogether. Meanwhile, the European Parliament followed a couple days later by backing a tougher China line by a landslide, complete with calls for a European naval presence around the Taiwan Strait, which would have read like geopol fanfiction not too long ago.

We think all of this is of a piece with the reshuffling of the eurodollar system we’ve been writing about for much of this year (the short version being that the global financial system’s free ride on US dollar rails is over) and with the administration’s broader attempt to pull more economic gravity back onshore. That in turn plays into where we see the puck going with Treasury’s efforts to tokenize the dollar, which longtime readers will know we think is best understood as an attempt to make T-bills spendable at global scale and to install them as base collateral at the center of a more Treasury-aligned dollar system. As we’ve always said, a great deal has to go right for this to work out: the 10-year once again spending the week flirting with quarter-century highs on top of heightened volatility doesn’t give the administration a terribly long leash, and it’s even harder to call the vicissitudes of the European electorate than it is to predict the contents of the President’s next tweet (sorry, Truth). But we continue to think this effort benefits bitcoin one way or another in the long run: either the volatility required to get there blows something up and forces an acceleration of the new Fed-Treasury Accord that already seems to be taking shape, or some version of it works and opens up a whole new vector for expanding dollar liquidity in the form of a Treasury-led dollar, with scarce assets and hard money sitting downstream of both paths.

Selected Portfolio News

Strike launched Bitcoin Interest on Cash, allowing users to earn 3.6% interest on FDIC-insured cash balances, accrued daily and paid out monthly in bitcoin:

Strike also launched Stacks, a new feature that lets users organize their bitcoin savings into distinct buckets for both personal and business accounts:

StatMuse launched StatMuse MCP, giving AI agents built on Claude, ChatGPT, or any other MCP client direct access to StatMuse’s stats, odds, box scores, and injury news across every league:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Market Updates

The Iranian economy appears to be buckling under the weight of the US blockade and sanctions, with the New York Times (yes, that New York Times) running a feature on the heavy toll, while the country’s oil minister abruptly resigned with no reason given.

Tehran nonetheless maintained a tough posture, with a senior official telling Reuters that Iran will never give up its right to enrich uranium and that there are currently no talks underway with the US, which was enough to push Brent back above $102 / barrel.

Kinetic action in the area matched the rhetoric, as tanker strikes picked up pace and pushed deeper into the Persian Gulf, including an attack on a vessel off Qatar, the first reported strike that far inside the region in about a month. On the other side of the Arabian Peninsula, Yemen’s Saudi-backed government forces retook the key Red Sea port of Mokha from the Houthis, reversing last month’s capture.

All told, oil stayed elevated, with WTI hovering around $90 and Brent above $100 for most of the week, though Chinese refiners are set to resume fuel exports just a week after halting them, which should help the diesel situation on the margin.

That said, while total volumes through the key Middle Eastern chokepoints generally remained solid on the week, the cost of facilitating those volumes has continued to skyrocket, with tanker rates that will soon need to be plotted on a log scale (though note this is a relatively larger problem for Asian industrial economies).

President Trump tried to cool things off late in the week, pinky-swearing that the US won’t attack Iran before the midterms and describing talks with Tehran as “productive,” a characterization Iranian officials apparently didn’t share.

The President also announced an agreement for the US to lift sanctions on Russian oil to allow for imports of Russian diesel, though – aside from this being an interesting way to flex the recently passed Lindsey O. Graham Sanctioning Russia and Iran Act – it’s unclear how needle-moving this will actually be in the near term.

Europe’s sovereigns had another rough week, with French spreads to bunds widening faster than they did during the 2010 Greek debt crisis, as France’s debt to GDP now nears 120% against a backdrop of tight energy markets and accelerating demands on the welfare state.

Paris’s answer was to copy the US’s homework and consider issuing more at the short end, with the country’s finance minister conceding that demand for 30-year paper has gotten “a bit trickier at the moment.”

Local appetite for austerity to address the unsustainable fiscal situation appears limited, as Marine Le Pen (the right’s leading candidate to replace President Emmanuel Macron next year) proposed a budget that immediately drew backlash despite including a provision to lower the retirement age all the way down to 60. At the same time, a leading leftist candidate vowed to prosecute the head of the country’s central bank for having the temerity to notice the impending fiscal crisis.

But the growing fiscal pressure seems to be clarifying positions on the China question, as Germany and France jointly sent Brussels a proposal for a trade “kill switch” that would allow an immediate cut-off from the EU market.

The European Parliament followed suit by a landslide, voting for a tougher China stance that labels Beijing a “decisive enabler” of Russia, backs a continuous European naval presence around the Taiwan Strait, and most importantly targets Chinese “export dumping” into European markets (I feel like I’ve heard this one somewhere, but can’t quite put my finger on it).

Elsewhere in efforts to firm up the Western flank, Secretary of State Marco Rubio stopped in Iceland, where both sides signaled openness to a larger US military footprint in the area.

South of the border, Trump ally Flavio Bolsonaro pulled ahead of incumbent President Lula in the first round of Brazil’s presidential election, setting up a runoff on October 25. The result, which once again defied projections from most mainstream polls, is the latest example of a clear rightward shift in the US’s backyard since the start of Trump 2.0.

Back in the US, the FCC said it will vote to require that the labs testing electronics sold in America be located domestically or in countries with reciprocal arrangements, as the White House continues to focus on reshoring and supply chain security at the edges.

Those reshoring efforts have yet to show up in the topline trade figures, as the US trade deficit widened to its largest since Liberation Day, though stripping out the AI buildout’s computer and telecom imports tells a very different story, with the deficit across everything else halved since April 2025 to its lowest since at least 1994.

Beijing, meanwhile, is busy shoring up its own foundations, closing hundreds of banks in what has become a record consolidation drive ostensibly to “bolster the financial system.”

Bank balance sheet hygiene was on the agenda stateside as well, as the New York Fed has apparently been reviewing major banks’ exposure to a deteriorating private credit market, with bank lending to nonbanks having ballooned past $1.5 trillion.

As the Fed looks into private credit, the White House has continued to look into the Fed, with the President escalating his ongoing feud with Fed Governor Lisa Cook via appointment of a new committee to investigate mortgage fraud allegations against Cook.

Despite growing volatility in the Fed-Treasury-White House relationship and ongoing inflationary pressures, Citadel Securities made the case that almost all of September’s increase in the 10-year came from real yields, pointing to stronger growth and stiffer competition for capital rather than inflation or sovereign instability as primary drivers of the recent surge.

New Treasury henchman David Zervos published some charts arguing in the same direction, highlighting that four key measures of core inflation are all trending lower for now.

The bond market seemed to take a breather this week, though only after a strong 10-year auction on Wednesday got the benchmark rate back below 5.3% alongside the MOVE Index falling back below 100.

Of course, the load on prospective Treasury buyers isn’t going to get any lighter, as President Trump expanded his $5,000 check offer to all adult citizens (clocking in at a roughly $1.2 trillion total tab) if Republicans hold both chambers in the midterms.

Treasury Secretary Scott Bessent will likely continue to run the Activist Treasury Issuance playbook to fund initiatives like that (which, to be fair, may meet the same fate as DOGE Dividends), as Citigroup projects Treasury will continue shifting billions in 30-year issuance to the front end while potentially discontinuing 20-year issuance altogether.

As for the main growth engine implicitly supporting all this issuance, OpenAI shared another batch of hundreds of results on open math problems from an unreleased internal model, though one researcher flagged that the company’s earlier Navier-Stokes proof may not actually be as robust as the lab initially claimed.

But either way, rumors suggest that most of the latest results came from one-shot prompts to a single model that’s still in training, with none of the elaborate agent swarms behind the Navier-Stokes work, which if true would arguably be the most meaningful data point out of this latest round of abstruse proofs that ~12 people in the world can actually verify.

All the galaxy brain math wasn’t enough to get markets going, though, as attention quickly shifted to a Financial Times report that OpenAI’s annual recurring revenue is ~$20 billion lower than previously reported, tanking equities as investors fretted that the lab’s ARR is “only” $50 billion (a number that likely would have gotten you laughed out of most rooms nine months ago).

There’s likely some nuance here, including that the “previously reported” larger figure has somewhat unclear provenance and that the delta may come down primarily to definitions, but the episode shows just how levered the whole trade is to a small handful of companies in the short run.

The week also brought some signs that the overall AI winners trade may have a path to fanning out, as emerging American lab Reflection AI (notably backed by accelerator giant Nvidia) launched an open-weight model built to compete with top Chinese open-weight offerings.

Less encouragingly, CrowdStrike reported that a cyberattack on several of South Korea’s biggest banks last week may have been carried out by a single person armed with an open-source AI tool and a handful of off-the-shelf models.

As the math and cybersecurity advancements of the latest models continue to proceed at a breakneck pace, “bitcoin security researcher” Justin Drake argued that the industry should prepare for AI to break elliptic curve cryptography – the cryptographic scheme underpinning private key security in both bitcoin and many other systems – within months, even ahead of any breakthroughs in quantum computing.

Coinbase’s head of cryptography Yehuda Lindell was not so sure, publicly disagreeing and arguing this is a low-evidence claim. We lean very much in this direction as well, though we would note for concerned users that various mitigation measures against an overnight left-tail scenario already exist (e.g. avoiding address reuse) and that long-term explorations of new cryptographic approaches by serious bitcoin researchers are well underway.

In any case, bitcoin stayed mostly rangebound in the mid-$80,000s all week as ETF flows remained stuck in neutral.

Regulatory Update

Treasury’s FinCEN withdrew two controversial proposals targeting digital asset users, scrapping both a 2023 plan to treat cryptocurrency mixing as a primary money laundering concern and the 2020 “unhosted wallet” rule that would have forced banks to report transactions with self-custodied wallets.

Noteworthy

Robinhood added $25 million of bitcoin to its balance sheet as it continues its broader digital assets push.

Ledger said it is investigating what appears to be an elaborate supply chain attack after reports that more than $86 million was drained from hundreds of wallets tied to devices sold through a Southeast Asian reseller.

The bond market beatings will apparently continue until morale improves, though this time the sharpest pain was felt on the other side of the Atlantic. The US 10-year pushed up toward its highest level since roughly the turn of the century, but the picture looked considerably uglier in Europe, where the 30-year gilt broke 6% for the first time since 1997 and French CDS spreads blew out to Eurozone crisis levels, ultimately prompting the IMF to do its best Leslie Nielsen with a public assurance that bond markets are functioning in an orderly manner (roughly as encouraging as when your waiter assures you your food will be right out). We’ll let readers form their own judgments on the degree to which the chaos in European bond markets is tied to the recent launch of Operation Economic Outcast, but there’s no doubt that the ongoing disruption to energy flows is putting Europe in traders’ crosshairs heading into winter. Encouragingly, shipments of crude products through the Middle East appear to have returned almost to normal for now (a tough look for the Twitterati posters assuring everyone of financial apocalypse by May), but diesel and refined product supply remains heavily disrupted, which finally gave the White House the ammunition it needed this week to arm-twist a 100-million-barrel SPR release out of the Europeans. Whatever its long-run effect on prices, we think this whole situation is a decent microcosm of the White House’s overall strategy: squeeze relatively weaker allies and near-allies on energy and funding costs to drive concessions that will make a Western decoupling from China more feasible (and French President Emmanuel Macron’s public heel-turn on Chinese industrial policy this week may give readers some sense of how this agenda is proceeding).

That said, the US’s runway isn’t infinite. A softer than expected PCE print, a jobs report that barely showed a pulse, and two of the Fed’s top officials pushing back on an October hike would typically make for a pretty friendly setup for Treasuries, yet none of it did much to get the 10-year down on the week, and bond volatility is getting decidedly uncomfortable. It’s against that backdrop that we found a few other headlines particularly interesting, including President Trump’s comment that “certain levels of inflation” will help pay off the debt (while there are also “other means” of dealing with the national debt he’d prefer not to discuss) and Treasury Secretary Scott Bessent’s hiring of longtime gold standard advocate Judy Shelton as an advisor. It’s hard to say how much to read into any one of these, but taken together with everything we’ve seen over the past couple years and the administration’s clear willingness to socialize negative externalities onto vassals allies, they make for an eyebrow-raising cluster pointing to an ongoing phase shift in the dollar system. That of course brings us to bitcoin, which held up remarkably well against ripping global yields and a stronger dollar, historically about the worst hand you could draw for the corn; instead, it has started to trade with dollar strength, while the bitcoin/gold ratio has continued grinding higher. This could just be another late-bear headfake, but we think ahistorical divergences like this are going to be increasingly important to watch as the global game board gets reset.

Selected Portfolio News

Unchained began offering bitcoin-backed loans for trust-held bitcoin, allowing clients who hold bitcoin in a trust to borrow against it for qualifying business or investment purposes:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

Unchained launched Bitcoin Ecology, a new essay series from the team behind Bitcoin Astronomy arguing that peer-to-peer markets for data transmission, storage, and computation built around bitcoin are the natural “ecology” for AI.

Market Updates

The ongoing stalemate in the Persian Gulf saw a particularly interesting development over the weekend, as last week’s US-China summit in DC concluded with a joint statement suggesting both Trump and Xi agree that Iran should not develop nuclear weapons and that no country “can be allowed to impose tolls on international waterways.”

Tehran’s list of allies may be growing thin at a tough time, as the Wall Street Journal ran a deep dive on just how far Operation Economic Outcast has reached, with Treasury teams fanning out across the globe to pressure governments, banks, and airlines into cutting off the regime.

The rest of the Gulf, meanwhile, seems to have largely gotten back to business, with Saudi Arabia’s East-West pipeline resuming exports after repairs and total crude shipments through the Middle East recovering to more than 90% of pre-crisis levels (though that increase in flow hasn’t dramatically reduced final costs to consumers so far, as the workarounds needed to traverse the Strait of Hormuz are adding something like $30-40 per barrel in added costs).

Iran’s own exports, on the other hand, remain at zero, as Secretary Bessent was happy to confirm in all caps.

The Saudis, for their part, have ended up in firmly net positive territory relative to the pre-war status quo, with the Kingdom’s annual oil export revenue climbing from $150 billion to $210 billion or more as the increase in prices has more than offset volume headwinds (though it’s worth keeping an eye on new dust-ups with the Houthis that resumed late Friday).

Perhaps in response to a progressively less favorable setup, Iran allegedly agreed to halt uranium enrichment in exchange for sanctions relief, though President Trump later said no such deal is on the table.

The IRGC also tried its hand at a DTC campaign, sending an open letter to the American people which called the US a “third world country” that now has to rely on selling its natural resources to survive (Operation Economic Outcast has apparently also depleted the Ayatollah’s sense of irony).

Washington’s reply came in the form of more hardware, with the US sending a third aircraft carrier and up to 10,000 more troops to the region.

Despite the buildup, increasing flows from the Gulf pushed WTI back below $90 for the first time in several weeks. That said, diesel remains a different story, with Gulf exports of refined products still running at half of 2025 levels, while oil & gas executives surveyed by the Dallas Fed projected diesel prices won’t return to normal for more than a year.

That ongoing diesel pain led the administration to tell France and Germany to release their emergency diesel stocks or face a US export ban, which we previewed last week might be the real motive behind all the export ban chatter.

Europe got the message quickly, as the G7 countries agreed to release 100 million barrels of diesel and crude over 4 months, putting some downward pressure on diesel prices for now as that release would represent roughly a third of the net decline in seaborne diesel supply this year.

Shortly thereafter, the President clarified that “we were never going to do” a US diesel export ban, a Lucy/Charlie Brown dynamic that incidentally may be instructive in thinking through virtually everything the White House says about the war.

Beijing unsurprisingly went in the other direction, with Chinese refiners halting exports of oil products until further notice as local stocks draw down.

China also tightened export controls on its human capital, broadening existing travel curbs to encompass the families of top tech and AI talent.

French President Emmanuel Macron started sounding a lot like Trump this week, excoriating China for “massacring” Europe’s industrial base through excessive state subsidies and export dumping. Japan has likewise been voting with its feet, with a record number of Japanese companies exiting China over the last two years.

Closer to home, the WSJ reported that the Trump initiative to build China-free supply chains for military gear and critical minerals is, in the paper’s own words, “starting to work” (though it will take at least a few years to drive meaningful progress), while JPMorgan CEO Jamie Dimon used a Journal op-ed to call for more industrial policy and tariffs as part of a plan for the Western world’s revival.

In the industry at the center of that tug of war, Nvidia launched its Open Agent Safety Platform with more than 100 ecosystem partners, a set of tools the company says would have prevented the infamous Hugging Face breach and other recent cybersecurity incidents.

Nvidia’s pitch that better tooling can keep AI in check was likely music to the administration’s ears, as House Speaker Mike Johnson reiterated the President’s stance that we’re not slowing down AI, saying “we do not need a moratorium” and calling the doom narrative “a Chinese psyop” (FWIW, it would not be the first time).

President Trump kept the focus on AI by gathering the industry’s key leaders to develop and sign a White House Accord on Super Intelligence focused on safety, though it appears no one used AI (sorry, SI) to proofread the document.

Trump also ruled out nationalizing the labs, though he noted the government might take a 10% stake in OpenAI and Anthropic as it did with Intel (an arrangement we’ve been flagging since the summer).

That may be just what Anthropic is angling for as it prepares to go public, with a leaked S-1 reportedly showing a staggering operating loss of $8 billion in 2025 (though this also predates the company’s parabolic revenue ramp this year) and plans to spend over half a trillion dollars in compute buildout in the coming years.

We don’t imagine this IPO, if it indeed happens later this year, will do many favors for S&P 500 breadth, which is now at its worst level since 2000. That said, the Ed Zitrons of the world may need to wait a bit longer for the apocalyptic AI blowup that has been the subject of much Twitter fantasizing, as neocloud Lambda closed a 7-year, $1 billion investment-grade term loan at 6.78% fixed (i.e. 60 bps tight of your federally subsidized 30-year mortgage).

Elsewhere in AI, Synopsys and OpenAI struck a chip design partnership that includes a revenue share for OpenAI based on how much its model improves designs, potentially a sign of things to come for how the labs monetize.

That AI productivity story is also doing some heavy lifting at the Treasury, as Bessent urged the Fed to keep an “open mind” on interest rates given the deflationary benefits of AI.

Bessent also hired Jefferies economist David Zervos — who is known for supporting Treasury’s buyback strategy, arguing that recent pressure on yields has come from growth rather than deficit spending, and being Kellyanne Conway’s boyfriend — as a counselor to the Treasury. Joining Zervos is longtime hard money advocate Judy Shelton, who has pitched 50-year Treasury bonds backed by US gold reserves.

But apparent progress in the Strait of Hormuz and a recommitment to pushing the AI frontier didn’t do much for the long end, as the 10-year rose to 5.3%, a quarter-century high, with the MOVE Index staying above 100.

That was despite New York Fed President John Williams saying there’s “no need for urgency” on rates and Vice Chair Philip Jefferson saying the same a couple days later, both pushing back on an October hike that markets had priced as high as 70%.

Interestingly, the pressure on yields also came against the backdrop of generally softer data points that would typically drive a kneejerk bond bid, as August’s PCE reading came in well below expectations with core at 3% Y/Y and September’s jobs report missed expectations badly, with barely any net new hiring.

The latest S&P manufacturing PMI did advance to another post-COVID high, though prices paid ripped much higher as well.

European bonds got hit even harder than Treasuries (you may be sensing a pattern here), with OATs reaching 20-year highs and French CDS spreads jumping back to Eurozone crisis levels, while 30-year gilts broke 6% for the first time since 1997.

But the IMF said don’t worry, nothing to see here, reassuring the public that bond markets are “functioning in an orderly manner.”

President Trump seemed relatively unbothered by the inflation side of the ledger, noting that “certain levels of inflation will also pay off [the national] debt very rapidly,” and adding that there are “other means” of dealing with the debt he doesn’t want to talk about.

One of those means may be hiding in plain sight, as a new San Francisco Fed paper found that Treasury purchases by stablecoin issuers (whose tokens are, in effect, spendable T-bills) have offset more than 40% of China’s divestment from US government debt.

Foreigners apparently continue to view the dollar as the tallest of the seven dwarves as well, with net foreign purchases of US equities spiking to a new all-time high of roughly $400 billion in Q2, no doubt a narrative violation for the adamant de-dollarization Millerites (though a good chunk of this likely came from Cayman-domiciled hedge funds).

Despite worldwide yields continuing to rip, bitcoin held in strongly on the week, rising as high as $87,000 again while the corn started to form an interesting positive correlation to dollar strength.

Importantly, this looks somewhat unique to bitcoin, as the bitcoin/gold ratio also kept looking much better this week.

Regulatory Update

The SEC proposed new rules to make institutional bitcoin custody easier in the absence of CLARITY legislation, including letting advisers and funds self-custody client assets when no qualified custodian is available.

A Senate investigation linked leading stablecoin issuer Tether to Iran, finding rampant use of USDT by the regime, and on the same day Tether said it has frozen roughly $550 million in Iran-linked USDT this year.

Noteworthy

Pseudonymous bitcoin and ecash developer Calle unveiled Federated Cashu, a new design that lets a federation of operators run a Cashu mint, so users no longer have to trust a single operator with the security of their funds, an encouraging step forward for scalable bitcoin privacy tools.

The bond market had a terrible, horrible, no good, very bad week, though the culprit in this case looks a bit different than in prior versions of this story. The last time the 10-year Treasury yield was sitting where it closed out this week (north of 5.2%, a three-year high), the American industrial economy had a decidedly worse complexion. Back in October 2023 (those halcyon days when almost no one had ever heard of recursive self-improvement), PMIs had spent the better part of two years in a sharp downtrend and were in the middle of one of the longest runs of contractionary readings in the history of the data series. This time around, they’re heading in the opposite direction, with this week’s S&P composite print ripping to its highest level since July 2021. Oil and inflation have gotten most of the focus as drivers of the yields story, and they’re no doubt important; however, rates are generally procyclical (absent explicit Yield Curve Control – bookmark this for later), so it’s not entirely shocking to see the long end moving higher just as the US embarks on a new Manhattan Project whose staunchest advocates believe it will deliver double-digit GDP growth (especially since that project is making demands on physical-world resources the likes of which we haven’t seen since World War II). There’s one obvious, though far from cost-free, bailout mechanism for this upward pressure, but so far the folks holding that lever have shown little interest in acting as a release valve against the procyclical uptrend, with Fed Governor Michael Barr and New York Fed President John Williams both lining up behind more hikes this week.

As we’ve argued elsewhere, this is the essential conflict facing the administration: whether GDP growth and its attendant tax receipts can outrun higher debt servicing costs by enough to keep nondiscretionary outlays flowing without recourse to Ye Olde Money Printer. This week’s renewed bond volatility didn’t do them any favors there, with the MOVE Index finally breaking out of the fairly stable range it had held for months, though what looks like an easing oil situation out of the Middle East may be a partial offset in the coming weeks. At the risk of repeating ourselves, this looks like it sets up two live paths from here: In the first, the growth leg is for real, receipts rise fast enough to keep the interest bill in a workable spot, and the buildout more or less pays for itself (with a little help from a new digital dollar to sop up short-end Treasury issuance). In the second, a Fed unwilling to lean on the long end runs into a Treasury that can’t afford blended yields much higher than this, and we get another classic step-function change that has characterized so much of recent American financial market history. But whether Bessent et al. ultimately get to run a victory lap or not, we’re clearly facing a major phase shift, and we think either way this breaks will entail a clear role for scarce, programmable money as a base collateral asset.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Market Updates

It appears rumors of Saudi Arabia’s oil standstill were greatly exaggerated, as the Kingdom aggressively ramped Gulf exports back up early this week in the wake of the East-West pipeline attack, loading ~14 million barrels onto 7 VLCCs at once, while also telling Asian refiners they’ll soon be able to pick up cargoes from the key Red Sea port of Yanbu (and per satellite imagery, they were apparently doing so by mid-week).

The Kingdom has now sold roughly 100 million barrels to Asian buyers since last week despite the disruptions, helping push total Saudi oil exports to their highest level since the start of the war.

France, meanwhile, said it will deploy forces to defend Yanbu from Houthi attacks, a notable shift in kinetic posture from one of the states most impacted by Middle East energy disruptions, and one that sets up an interesting new front in what looks like a metastasizing proxy war, per the Wall Street Journal’s reporting that Yemen’s Houthis are increasingly supplied by China.

More broadly, Hormuz flows appear to be continuing in the right direction, with 13.5 million barrels per day clearing the waterway toward the end of the week, the highest since early July (though likely at a higher than optimal cost given the need for dark transits and other workarounds).

Those barrels can’t arrive soon enough for China, where fuel inventories have fallen to decade-plus lows.

Late in the week, Tehran offered to reopen the Strait within seven days if the US eases its blockade and lifts oil sanctions, which may strike some readers as a curious bargaining chip given the aforementioned oil flows out of Hormuz.

Predictably, President Trump rejected the proposal (though, ever the gentleman, only after Friday’s market close) and is reportedly planning to ramp up the bombing again after the midterms.

Treasury Secretary Scott Bessent, for his part, promised to shut down all Iranian airlines worldwide starting Wednesday and threatened secondary sanctions on anyone who fuels, services, or tickets them.

Back on the home front, trucking spot rates net of fuel are up 27% Y/Y, one offset for carriers staring down much higher diesel prices.

But given the ongoing strain of high diesel prices, Bessent said the Treasury is examining a diesel export ban (with Trump chiming in that he’s called for one too), even as Energy Secretary Chris Wright said it wouldn’t work and instead hinted at a “voluntary cap” on exports.

Reporting out of Politico noted a decision on a ban would be coming by the end of the week (though as of this writing it’s still crickets), and while there are reasons to think a ban may not actually lower diesel prices domestically, there are also reasons to think that isn’t the primary motive.

Whatever the actual goal might be, the White House chose to take a victory lap on the industrial economy this week, with Bessent going out of his way to praise US manufacturing growth alongside PMIs that ripped way above expectations (albeit with the highest prices-paid reading since October 2022).

In response to that growth, Fed Governor Michael Barr said the Fed was previously “out of position” and that more hikes are likely needed, while New York Fed President John Williams agreed (though he was largely just reiterating the FOMC’s own commentary).

That combination of scorching growth and hawkish Fedspeak sent the 10-year back above 5% in a massive one-day move on Wednesday, and it kept going to finish the week north of 5.2%, the highest level since October 2023.

Perhaps more importantly, the MOVE Index finally broke out of its recent range, rising above 100 for the first time since the spring, which as we’ve noted is probably the bigger short-term constraint than the absolute level of yields.

The rates action also pushed the average 30-year fixed mortgage close to 7.5%, once again knocking on the door of multi-decade highs, which we imagine is not a welcome sight for many Congressmen seeking reelection in ~6 weeks.

Nor will it help multifamily landlords, who per the Wall Street Journal are sitting on a $2 trillion debt problem that is only getting worse and bears monitoring as one of many sources that could disrupt Trump and Bessent’s ongoing high-wire act.

Speaking of midterms, the Supreme Court ruled that the administration’s SAVE voter registration system is legal and can be used for the elections in just over a month, though the White House can’t force states to use it (we’ll let readers decide whether such a database could have any material impact on election outcomes).

The engine behind much of this week’s growth story is also shaping up to be one of the more contentious issues heading into November, but President Trump doubled down on his anti-pacing stance from last week, saying he’s not going to stifle the AI industry and noting for good measure that President Xi Jinping agrees with that view.

The White House was even reportedly considering Treasury Secretary Bessent for a new “AI Czar” position – a merging of responsibilities that would tell you a lot about the key drivers for making this whole gambit work – though Trump later said that’s not happening.

OpenAI has reportedly almost reached the long-theorized milestone of recursive self-improvement, with its internal models now handling much of the work of building and training new ones, while announcing that a new model it started training just three weeks ago has already solved 100 open problems in math.

Even with all those advances, insiders said this week that the AI labs have largely oversold the cybersecurity threat from their models.

On the hardware side, HBM export prices dropped for the first time in 5 months as Acer declared the structural memory shortage to be coming to an end, which may be welcome news for the hyperscalers and neoclouds tasked with making compute great again (even if it’s less positive for the memory bros).

But the permitting office remains perhaps the most significant bump in the road for this whole story, as Texas Governor Greg Abbott once again put a moratorium on new data center builds until his ERCOT audit is completed, while Oracle sent a force majeure notice on its stalled New Mexico data center, citing regulatory and permitting delays.

Those headlines notwithstanding, data center timelines remain broadly intact across the US, with Oracle’s New Mexico project accounting for only ~1% of capacity under construction.

Away from the compute complex, Mexico’s President Claudia Sheinbaum said Mexico and the US have reached agreements as Washington races toward a new trade deal to replace USMCA, likely putting more pressure on Canada.

The US also pushed the Donroe Doctrine further this week with a joint statement on “defending hemispheric sovereignty” published alongside various South American states, while President Trump again hinted at more influence operations in Cuba, telling the UN that “freedom will be coming to Cuba.”

Further north, the text of the Greenland deal looks pretty favorable to the US, while the US, Japan, and South Korea established a Trilateral Arctic Pacific Partnership at their meeting in New York.

All those global realignment headlines set the table for a characteristically chummy Trump-Xi meeting this week, which didn’t break a ton of new ground but did result in some mutual cuts to select tariffs.

In a less friendly signal for Beijing, new reports this week showed that Saudi Arabia has withdrawn from mBridge, China’s cross-border payments platform intended to serve as an alternative to the traditional and US-centric SWIFT system (though the exit technically happened last year and is only being announced now).

Washington is continuing to build out its own new rails in the meantime, with Bloomberg reporting that Treasury, the State Department, and the Development Finance Corporation are all working on initiatives to promote the use of USD stablecoins abroad, as the US keeps making preparations for the eurodollar to meet the same fate as Joe Pesci at the end of Goodfellas (less cinematically inclined readers may infer this was not a happy ending).

As the administration continues to play footsy with stablecoins, bitcoin had a strong week of its own, with spot ETFs taking in their largest daily inflows all year while the corn broke $87,000 before consolidating around $84,000 to close out the week.

That haul pushed ETF flows positive YTD for the first time since April, a pretty notable turnaround after the abysmal price action earlier this year.

Bitwise also published a review of its conversations with 15 large asset managers and found that none reduced their bitcoin allocation during this past year’s drawdown, while many even added on the weakness. Meanwhile, BlackRock published an overview of the ways AI may drive more adoption of “digital assets.”

Regulatory Update

The CFTC released new guidance on how digital assets can be used as collateral in derivatives markets, potentially another incremental step in plugging bitcoin into the plumbing of traditional finance.

Secretary of War Pete Hegseth’s latest investment disclosure included some exposure to bitcoin.

Noteworthy

Halcyon Energy released a new forecast calling for 100GW of new gas-fired generation in the US from just 2027 through 2029 based on officially filed plans alone (even if many of these end up subject to the kinds of permitting delays discussed earlier, this is still a staggering figure).

Block joined the x402 Foundation to bring bitcoin Lightning payments to the x402 open standard for agentic commerce, an encouraging step toward the machines using money that actually works natively on the internet.

A new white paper lays out a design for “shielded bitcoin,” enabling more private transfers on bitcoin’s base layer.

The US seized the assets of an offshore bank holding a small amount of USDT collateral, a reminder of just how much of the stablecoin stack still runs through the traditional banking system.

It increasingly feels like we’re coming up on a point where this phase of the game breaks one way or another, at least temporarily. Energy prices have returned to year-to-date highs on the back of an attack on the Saudi East-West Pipeline that had been doing so much to relieve the commodity stress coming out of Iran, which pressures Europe in particular and potentially China as well, given their SPR drain through this year and a Chinese oil benchmark now widening out to a steep premium over WTI. It’s also likely causing no small amount of discomfort for President Trump and Republicans heading into midterms, since prices at the pump tend to be inversely correlated with the mood of the median voter, while ripping diesel prices are now officially crimping industrial freight profitability (a problem for successfully running it hot). Compounding the rising cost of making things in meatspace was the Fed apparently moving into a new rate-hiking cycle (though we’ll see how long that lasts) and the 10-year working its way back into what has historically been challenging territory, both of which may present an issue for financing mankind’s largest ever capex project. And if that weren’t enough, the leading lights of that same project are suddenly trying to sell everyone on the idea that maybe we should all just take a breather on this whole AGI business for a minute, though virtually every data point we see suggests that’s either posturing or ultimately not going to be up to them (the White House made it pretty clear this week that we’re not slowing down regardless of what the Effective Altruist math says about utility maximization).

So with all that in mind, we found this week’s bitcoin price action extremely interesting, as the corn broke $81,000 again and cleared its 50 week moving average for the first time all year (traditionally a sign of a bear market coming to an end). It managed that move amid decidedly choppy macro news flow and what looks like the defeat of the long-awaited CLARITY Act, even if we’d maintain that bill was ultimately pretty fundamentally meaningless for bitcoin. We don’t make it our business to call tops or bottoms, and our crystal ball on short-term price swings is pretty foggy. But we have to say that this combination of factors looks a lot like what you’d want to see if you were keeping your eyes peeled for bottom formation.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

Unchained launched support for ACH deposits, adding an alternative to wire transfers for funding client cash balances:

Media

AnchorWatch Co-Founder and CEO Rob Hamilton appeared on BMTV to discuss a wide variety of topics including bitcoin’s fundamental differentiation and shoring up security for bitcoin projects.

Market Updates

Anthropic CEO Dario Amodei blew up everyone’s weekend PA with an essay arguing that the industry must “pace” the rate at which it improves model capabilities after years of pushing aggressively toward recursive self-improvement and AGI.

Not suspiciously at all, this sudden call to pump the brakes on the largest capex project in human history was instantly echoed by Sam Altman, Elon Musk, Brad Gerstner, and various other Silicon Valley acolytes at the bleeding edge of the AI frontier.

The timing of this abrupt about-face was a touch awkward against reporting that Anthropic has locked down some $500 billion+ of compute commitments for the next few years, nearly triple its prior guidance through 2029 (a curious way to moderate frontier progress).

Amodei also floated the idea of the government taking a stake in AI companies, which we’d read as directional confirmation of the potential arrangement we laid out this summer.

Meanwhile, the company is also standing up an automated wet lab, which we take to mean they’re only comfortable allowing a rogue agent to develop a biological weapon under proper Effective Altruist supervision.

Our timeline simultaneously assured us that this means the labs are hitting a wall and totally cooked and that they’re advancing so rapidly they are legitimately unable to control their technology and that it’s all just classic regulatory capture and that it’s just a roundabout play to crack down on China and that it’s a way to crash the markets so everyone flees into bonds…but whatever the ulterior motives might be, the White House spent the week saying various versions of shut up, nerd to anyone asking about AI regulation.

Most publicly, President Trump phoned Nvidia CEO Jensen Huang mid-panel at the All-In Summit to assure the room that opposition to AI progress is all a hoax (a phone call that shouldn’t be particularly surprising given how important this capex wave is for the “run it hot” stance that is so critical to this administration’s strategy).

While the AI Millenarians were raining on the S&P500’s parade, energy markets gave the buildout something else to chew on, as oil prices ripped back up near YTD highs amid more escalation in the Middle East, with Saudi Arabia curbing deliveries to European refiners for the next several months as it repairs its crucial East-West Pipeline.

That squeeze was enough for French President Emmanuel Macron to call for an emergency G7 meeting on energy prices. Notably, the heightened oil market tightness of these past few weeks has also sent a key Chinese oil benchmark surging to multi-decade highs, good for a ~30% premium to WTI.

Energy Secretary Chris Wright seemed considerably less worried, describing the frictions as just a flesh wound, and the Saudis seemed to privately agree, with reports later in the week suggesting the Kingdom expects half its lost production from the attack to be back online within days.

Amid the pipeline disruption, the Saudis also seem to be relying on more reliable workaround routes such as – checks notes – the Strait of Hormuz, where flows broadly appear to be meaningfully picking up steam in recent weeks.

But even as some green shoots start to emerge around Hormuz, diesel is becoming a massive pain point domestically, with all-time high prices officially becoming a problem for American freight and logistics providers like JB Hunt, who issued a sharp downward revision to third quarter estimates on elevated diesel costs (not the kind of thing you want to see long term if you’re trying to ignite an American industrial renaissance).

The ongoing pain at the diesel pump even led Senate Majority Leader John Thune to float the idea of an export ban to help ease stateside prices.

Sustained upward pressure on key energy benchmarks did no favors for the bond market, with the 10-year Treasury yield moving back above 5% for the first time since 2023.

Despite these rising borrowing costs, Treasury Secretary Scott Bessent nonetheless assured Congress that there are ways to deliver the President’s promised $5,000 midterm dividend checks that “would not affect the deficit.”

On the industrial side, the CBO released new estimates suggesting the US has drawn down two-thirds of its missile interceptor stockpiles since last year as part of the fighting in Iran and that replacing that quantity could take up to five years. On the same thread, the week also brought reports that GM has been tapped (volun-told?) to use some of its production capacity to produce Patriot missile components, in line with similar announcements across the auto industry we’ve been cataloguing this year.

Elsewhere in increasingly normalized industrial policy, the Department of War announced a $450 million strategic investment into Elmet, the only integrated US producer of tungsten components critical for many defense applications.

On the trade front, Washington and Beijing are discussing some tariff cuts alongside a deal for China to buy US LNG.

The Lindsey Graham Sanctioning Russia Act was signed into law this week, authorizing tariffs of up to 100% on buyers of Russian crude (i.e. primarily China, and secondarily India if necessary).

But perhaps most notably for the White House’s attempt to reshuffle the global game board, the President announced an agreement with Denmark that (at least per Truth Social) hands Washington permanent control over security and all other needs in Greenland, ostensibly at “no cost” to the US. While it’s not quite up to the level of making Greenland the 51st state, it’s admittedly a pretty meaningful hat trick for the Donroe Doctrine alongside the moves in the Panama Canal and Venezuela that the US has made over the past year.

And speaking of our neighbors to the south, Venezuelan crude imports to the US have now ramped up to 800,000 barrels per day, the highest since 2017 after a multi-year period with no imports at all, as reports elsewhere suggest Exxon is continuing to advance negotiations to return to the country’s oil fields more than two decades after being forced out.

In a sign of the declining centrality of the Fed, this week’s FOMC meeting was not even close to the most notable event of the week, but the world’s key central bank did indeed raise rates as broadly forecasted on a unanimous vote, while signaling one more hike this year.

Interestingly, though, the Committee now appears less concerned about inflation than they were back in June when they voted to hold rates steady, which former temporary Fed Board member and noted low rates enjoyer Stephen Miran argued is an “incoherent reaction function” in a post highlighting various reasons the Fed shouldn’t hike.

Stop me if you’ve heard this one before, but the President responded to the news by once again calling for “1% or lower” interest rates.

While we can certainly debate the merits of the Phillips Curve tradeoff as well as the tenability of higher policy rates against the debt and strategic backdrop the US is facing, the latest macro data this week didn’t point to a particularly soft economy, as retail sales came in way above expectations and the Atlanta Fed’s GDPNow estimate moved up to 5.1% for Q3.

Against that particularly hairy and uncertain backdrop, bitcoin broke the $81,000 level again, trading above its 50 week moving average for the first time all year (a development that has historically marked the end of bitcoin bear markets).

Regulatory Update

The final text of the long-anticipated CLARITY Act arrived with a variety of compromises baked in, but the bill ultimately failed to clear cloture which for practical purposes ends the process for the near-term.

Some Democrats reportedly still want to keep talks going, though SEC Chair Paul Atkins reiterated that the Commission intends to move ahead with its own rules regardless, and it wasted no time, rolling out a five-year innovation exemption for trading tokenized stocks.

More notably for our purposes, the House Financial Services Committee advanced ARMA (the successor to the BITCOIN Act of 2024) on a 28-21 vote, with a 20-year lock on the reserve’s bitcoin holdings.

Noteworthy

Revolut announced a data breach driven by attackers using a spoofed government email address that compromised the identity documents and personal addresses of a “limited” number of users, once again highlighting the dangers of KYC/AML laws.

Elsewhere in data you had assumed was yours, 404 Media reported that OpenAI has hired humans to read some ChatGPT conversations, with users’ personal information often reaching reviewers despite filtering.

Another September, another walk up to 5% on the 10-year, another round of Twitterati posts about how this may finally be The Big One. All Bloomberg Terminals were pinned to the 10-year Treasury chart this week as the benchmark rate for the world’s economic activity flirted with the 5% level for the first time since October 2023, which is fair enough given how much is downstream of keeping that number in a workable spot. Not helping matters was the price of oil — a key input into where that benchmark shakes out — once again breaking triple digits for the first time since the slap fighting in the Persian Gulf began in the spring. Despite the uncomfortable price action, neither of the two key architects of the Grand Plan (or the nation’s two Riverboat-Gamblers-in-Chief, depending on your persuasion) seemed particularly ruffled, with President Trump promising gas prices will come crashing down Soon^TM (though only after midterms) and Treasury Secretary Scott Bessent flippantly dismissing all his former hedge fund colleagues trying to fade his bond market balancing act.

Fed Chair Kevin Warsh may not be feeling quite so hot going into next week’s pivotal FOMC meeting, with markets now pricing in a more aggressive hiking cycle than we think is really tenable given the need to finance the buildout of all these cool killer robots (and as true patriots, we will only allow ourselves to be hunted down by American killer robots), not to mention that pesky matter of funding interest and entitlements. That said, a couple data points that we thought didn’t get enough airtime as the world holds its breath on the bond market were Treasury volatility remaining fairly rangebound and nowhere near the levels it touched the last couple times we were here (though we grant that the neat thing about volatility is that it is decidedly nonlinear) while the 30-year had one of its best auctions on record this week. Perhaps most notably, Treasury only used $5.2 billion of its announced $6 billion capacity for the closely-watched buybacks this week, marking just the third time in 53 long-end operations since the program began in 2024 that the agency has elected not to use all of its announced headroom, which may be tough to square with a Treasury that’s running out of options (or, to be fair, a thin dealer offer pool with a wide bid-ask spread).

So the way we continue to look at it: either Trump and Bessent have reason to be as confident as they appear — possibly due to some of this weeks’ headlines out of Iran, including new crude loadings down to 15% of prewar average with seaborne product about to run out; fuel lines lengthening in Tehran; and a Turkish bank in the penalty box with a much bigger one allegedly queued up for Monday — and the whole thing really is about to fall into place going into the midterms, which then clears a path for the reshoring and decoupling playbook we think they’re trying to run (and which we think will ultimately have a meaningful role for bitcoin). Alternatively, it’s all a bluff, something breaks, and we get another alphabet soup facility alongside what would likely amount to a new era of Fed-Treasury coordination, which is decidedly good for the corn as well. We look forward to seeing whether the house indeed always wins.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

AnchorWatch announced a partnership with CoinCorner to offer its unique, 1:1 insured custody option directly to CoinCorner users:

Stakwork launched Stadeum, an open-source platform focused on enabling “enterprise general intelligence”:

Media

Stakwork Founder Paul Itoi appeared on the Intelligence Snacks podcast to discuss the company’s unique approach to enterprise intelligence.

Market Updates

The Situation welcomed everyone back from Labor Day with an eventful week of Monitoring, kicking off with a reescalation in the Middle East that saw US forces destroy three IRGC tankers in the Gulf, followed by Houthi drones and missiles attacking various Saudi cities and energy facilities.

The renewed tensions pushed Brent crude back above $100 for the first time in months, with WTI following suit later in the week. Even more importantly for heavy industry (and by extension that whole running it hot thing we’ve been harping on), US diesel prices also ripped to new all-time highs.

Despite the proximity of this upward move to midterms, President Trump didn’t seem especially worried, assuring reporters that “right after the election, oil prices are going to be tumbling downward.”

The Houthis made that forecast considerably harder in less than 48 hours, torching the East-West pipeline that has served as Saudi Arabia’s main method for bypassing the Strait of Hormuz and then, for good measure, seizing the port of Mokha, a fresh complication for anyone with cargo in the Red Sea.

While the fight (and its proxy fights) continued to get more kinetic, the US Treasury spent the week ramping up its promised “financial violence,” sanctioning an Istanbul investment bank accused of moving Iranian oil revenue out of China, with Bessent expressing hope that no further institutions would need the treatment. He then promised a much larger bank will get the belt on Monday, warning the remaining holdouts they’re welcome to risk an “extinction-level event” for their companies.

The long-term success of the White House’s economic pressure campaign remains TBD, but the near-term signals sharpened considerably this week, as Iran’s new oil loadings fell to a YTD low of roughly 15% of the prewar average as seaborne barrels outside the American blockade are set to run out next month. Meanwhile in the domestic sphere, fuel lines in the country have reportedly become more common as government subsidies for local gas consumption expire.

Bessent was, justified or not, in similarly confident spirits on FX, telling an audience of aspiring SMU financiers “I am the house” when it comes to anyone betting against him in currency markets, while informing the Republican midterm convention that if the “Bloomberg Terminal bros” are unhappy with his policies, that’s too bad. (As recovering Bloomberg Terminal bros, we ask that you respect our privacy at this difficult time.)

The Japanese Yen, meanwhile, ripped from 160 to the low 150s as the BOJ (or perhaps someone named Schmott Schmessent) may or may not have leaned on the tape once again.

Elsewhere on Bessent’s increasingly packed agenda, Treasury said it would buy back up to $6 billion of longer-dated paper, above the $4 billion minimum he announced a few weeks ago, though below the $8-10 billion some had predicted. Notably, the desk then filled only $5.2 billion of it, which strikes us as a strange way to behave if the Treasury is in an increasingly desperate position (though we grant there could be some classic beating the sandbagged guide going on here; Bessent is a former hedge fund guy, after all).

But the 10-year was not happy, kneejerking higher on the announcement before breaking 4.9% for the first time since 2023 and settling, as of this writing, just a hair under 5%. Of course, it remains worth flagging all the same that the MOVE index is still sitting in the same range it has maintained since April, and we continue to think rate of change is more important than absolute level on a short time horizon.

After the week’s breakout action, the market is now pricing a significantly more aggressive hiking cycle over the coming year, which is not an especially comfortable place for Bessent counterpart Kevin Warsh heading into next week’s FOMC meeting.

Bessent’s old boss Stan Druckenmiller turned up again to argue rates are still too low given the profligacy of the US government, calling Committee members who describe current policy as restrictive “just ridiculous.” But perhaps more interesting to our eyes was his admission that he’s “afraid to short the dollar” because of the US’s enormous advantage in AI development (where have we heard that one before?).

But despite Druck’s (largely well-founded) concerns, this week’s 30-year auction drew the second-highest indirect bid on record alongside the lowest primary dealer takedown ever, an interesting signal from the foreign accounts that are supposedly on a buyer’s strike.

But it’s all good, as President Trump used the GOP’s midterms circus convention to promise every adult American $5,000 (the “Trump Dividend”) should the Republicans hold both chambers in November (my DOGE and Tariff Dividends must have gotten lost in the mail).

At an estimated cost north of $1.2 trillion, we can all rest assured this surely wouldn’t have any impact on inflation, which came in firm but broadly in line on the wholesale side at its highest 12-month reading of the year. The CPI print told a similar story, and while core slightly beat expectations, it also came in at its lowest level since 2021.

Over in the compute complex, an OpenAI researcher laid out the ways the company is closing in on recursive self-improvement, while Nvidia CEO Jensen Huang used the release of OpenAI’s Astra model to declare that AGI is here (his third such declaration, but who’s counting?). OpenAI also proposed a solution to the Navier-Stokes problem, which various Twitter experts who didn’t make it past Pre-Calc assure us is very impressive.

The mood was somewhat less upbeat at Anthropic, where a researcher four months into the job publicly ragequit over safety concerns, with the company’s own alignment lead chiming in to peg the odds of the machines killing us all at better than 10% within the decade. There are, we would note, some reasons to be skeptical about the motivations and timing of the narrative here.

Totally coincidentally, Anthropic also released a threat intelligence report cataloguing all the ways terrorists and threat actors are apparently using its models for espionage and other dangerous activity, while claiming that China’s gains in open source models have come on the back of ongoing distillation via fraudulent accounts — and specifically that hosted Kimi models are often silently redirecting to Claude and presenting the results as their own. And to top it all off, the company published its latest round of research reiterating that all your white collar work are belong to us.

Either way, President Trump says lmao, don’t worry about it babe, waving off the extinction risk while framing the whole thing as a race the US cannot afford to lose.

South Korea was similarly unconcerned about Skynet, announcing an AI for All initiative that hands every citizen free access to generative models on a budget tripled to roughly $7 billion.

And even more notably, the Pentagon is reportedly in talks to backstop a $5 billion loan to AI cloud provider Fluidstack, which slots directly into the new American industrial policy we’ve been tracking since Trump 2.0 began and validates a point we’ve made in previous issues: if the private market won’t fund the whole buildout, Washington appears prepared to.

Less apocalyptically, Americans without college degrees are enjoying one of their best job markets in years even as many of their credentialed peers face the worst conditions since the financial crisis, and new Economist data likewise points to AI as a net job creator for both blue collar workers and many segments of engineering and science.

Local governments increasingly don’t seem particularly sympathetic to that data, though, as a growing list of states are ripping up the tax breaks they previously offered to hyperscalers, with Illinois imposing a two-year pause and New Jersey scrapping $250 million outright. Meta is trying a different tack, promising to push local power prices down and cut direct bonus checks to teachers and firefighters.

While the sustainability of all this capex continues to be an open question, Oracle’s latest earnings call this week provided yet another data point indicating GPU useful lives are not quite as short as certain Substack savants might have you believe, with four-year-old accelerators renewing and reselling at a 20% premium to their original contracts.

Block (founded by Twitter’s Jack Dorsey) threw its hat into the banking ring this week with an application to the OCC for a national trust bank charter to custody bitcoin and stablecoins, putting the bitcoin-focused fintech in league with dozens of other digital asset-adjacent companies who have filed for banking charters this year.

Regulatory Update

Senator Cynthia Lummis warned this week that if CLARITY doesn’t clear the current session, the next realistic shot at comprehensive market-structure legislation may not arrive until 2030.

Various regulatory agencies look increasingly determined to proceed without it, with the SEC advancing its own regulatory framework of targeted exemptions for token offerings and the CFTC taking a piecemeal approach to specific activities.

Senate Republicans nevertheless sent around a 630-page revision ahead of one final vote opportunity next week, incorporating what Lummis says are more than 100 separate provisions added at her Democratic colleagues’ request (a concession rate that has so far produced no actual Democratic support).

And Bessent again pressed for passage, urging everyone to remain at the negotiating table and agree to the motion to proceed.

Noteworthy

In the latest AI-assisted attack on bitcoin infrastructure, Blockstream’s Liquid Network was drained of roughly 4,000 bitcoin, allegedly by white hats, though as things progressed it became clear the hats were decidedly gray, as about 85% of the funds came back and $47 million stayed behind as a self-awarded bounty.

Former Silvergate Bank CEO Alan Lane published a piece correcting the record on the closure of the bank, arguing that Silvergate survived a 70% deposit run intact and was wound down under political rather than financial pressure.

The publication of Lane’s piece makes the timing of new reporting on a DHS unit engaging in “predictive policing” based on Americans’ banking data even more sobering, as elements of Operation Chokepoint 2.0 clearly remain alive and well despite a change in administration.

Quantum computing poster child IonQ says it now has a path to breaking elliptic curve cryptography by 2028, publishing a full resource estimate that puts a 256-bit signature within reach of a 20,000-qubit machine in about 26 days, though there’s still no actual device anywhere near what’s required (and the path to actually get there remains uncertain).

Separately, StarkWare — fresh off last week’s first mainnet quantum-resistant transaction — reported that its researchers helped halve Google’s estimate of what an ECDSA compromise would actually require, cutting the earlier logical qubit figure by more than half.

A gaggle of bureaucrats can rarely manage to agree on saying anything in unison even once, let alone 34 times, so when the world’s top finance ministers concluded their G20 Asheville retreat with a short statement highlighting the phrase “economic growth” with that frequency, we’d suggest there may be some value in taking them at their word. As Treasury Secretary Scott Bessent summarized quite bluntly for the group in the room: the world is awash in debt, Plan A is to grow our way out, and there is no Plan B. Growth on this scale has to come from somewhere, and as we’ve noted in prior weeks, the Trump administration seems to have decided it will come from compute, hence a new DOJ brief supporting OpenAI’s training pipeline as a matter of national security and President Trump’s warning that towns opposing data centers will end up “backwards and poor.” In turn, compute on that scale needs credit, hence Secretary Bessent’s G20 comments about Dodd-Frank strangling Main Street and the need for an uptick in private credit creation (accompanied by vigorous nods from the CEOs of Goldman and JPMorgan, invited to a seat next to Bessent at the G20 Big Kids’ Table for the first time), as well as another vintage Truth Social rant arguing for the US to have the lowest interest rates in the world. And both compute and credit need cheap energy, hence the Venezuela deal that reportedly gives the US a guaranteed fifth of the country’s production at cost and a ROFR on the rest through a private company partially owned by the Department of War, the kind of industrial policy that the US hasn’t run in over a century.

It remains to be seen if or when this whole agenda will require another round of the QE bazooka, though we increasingly think anyone waiting for a precise replay of fall 2008 or spring 2020 is probably going to be disappointed. There will have to be accommodation in some form because the simple debt math we’ve addressed extensively in this newsletter doesn’t permit otherwise, but our sense is that it will take the form of a thousand small measures on the margin, none of which will look like a sudden step function change in the SOMA chart: an upsized buyback program here, an expanded foreign swap line there, and perhaps finally the slow (or maybe not so slow) emergence of a more Treasury-aligned dollar system featuring T-bills as base collateral. If that’s the direction of travel, we continue to encourage readers to consider what would be required to make that work at scale, and why, with all these critical plates spinning in the air at once, the administration continues to push its digital assets agenda forward.

Selected Portfolio News

Zaprite Head of Business Development Parker Lewis shared an early look at the company’s new P2P app that aims to make bitcoin payments seamless:

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

AnchorWatch Co-Founder and COO Becca Rubenfeld joined the Bitcoin News show to discuss the recent surge in AI-assisted social engineering against bitcoin holders and the practical steps users can take to mitigate the threat.

Market Updates

All eyes were on the G20 finance ministers meeting in Asheville this week, and the joint statement that emerged contained no fewer than 34 references to prioritizing economic growth over just a few pages, which may offer a not so subtle clue as to where the whole ballgame sits in the minds of those pulling the levers. For what it’s worth, the statement also went out of its way to flag digital assets and stablecoins as inputs to that agenda.

Despite the group choosing not to meet at the Biltmore — thereby sacrificing a great opportunity for a subtle nod to the railroad magnates whose 21st century analogs are critical to the administration’s whole strategy — Bessent stated the key theme for the group pretty plainly, telling the room the world is “awash in debt” and that the only way out is to “grow our way out of it.”

The committee emphasized, though, that this needs to be the right kind of growth, as 19 signatories approved of the view that “non-market-based economies” pushing out a never-ending stream of cheap exports while under-consuming domestically “is not sustainable”; intrepid readers may be able to guess who the lone dissenter was.

In a somewhat notable first, the summit gave prominent speaking slots to major American banking CEOs David Solomon and Jamie Dimon, an interesting coincidence as Secretary Bessent reiterated his case for banking deregulation to drive faster private credit creation.

While most eyes were on the growth-fest in the Blue Ridge Mountains, the Treasury Secretary was also keeping busy with Operation Economic Outcast, promising “financial violence” in the form of more bank sanctions over Iranian transactions (though, as with last week’s promise to remove of a major institution from the dollar system, it’s not entirely clear which institution or what kind of timing Bessent has in mind).

The European Union hopped on the sanctions bandwagon as well this week, formally joining the US’s financial campaign shortly after the original announcement, an interesting contrast to European resistance to the US kinetic activities in the Gulf earlier this year.

Iran’s President (whose ultimate authority seems roughly akin to the Assistant to the Regional Manager) echoed comments from last week suggesting a declining appetite for escalation within the civilian government, offering to return to the terms of June’s tentative détente if Washington does the same.

While the US continues to exercise a heavier hand in the Middle East, the rise of a new brand of American industrial policy got one of its most explicit signposts yet in the Southern Hemisphere with the release of more fine print from the Venezuela oil agreement. Among other points, the deal gives the US — more specifically, a corporation in which the Department of War controls a 35% equity stake, a structure that by itself should tell you something about where we are in the imperial cycle — the right to purchase the first 20% of production at cost, as well as a right of first refusal on the remaining 80%.

Chevron will also invest $7 billion into Venezuelan production over the next five years, roughly doubling its regional output to around 600,000 barrels per day.

And even Coinbase co-founder Fred Ehrsam wants in on the action, bidding for operating control of three regional tracts alongside the likes of Chevron, as the digital assets world mysteriously keeps popping up in the orbit of the US’s geostrategic ambitions. No word yet on the tokenomics or airdrop date of PDVSACoin.

Despite movement on that deal, which even if fully instantiated will not be meaningful to global production for some time, oil prices still moved higher on the week, helped along by renewed escalation in the Gulf, where US forces struck rocket launchers on Iran’s Larak Island and Tehran answered with missiles at US bases in Jordan (so much for no need for things to get more kinetic), all of which helped push the 10-year to its highest level in almost two years.

That was enough for Fed Governor Michael Barr to say that if inflation isn’t moderating, the Fed should act decisively to raise rates at the September meeting. But Bessent said there’s no need for all that hiking hogwash, arguing that you don’t raise into a supply shock absent second- or third-order effects, with core inflation holding steady.

He found an unlikely ally in New York Fed President John Williams, who argued yields are surging because rates are procyclical and growth is picking up, thanks largely to “big investments in AI and data centers” (keep this one in mind for later).

Fed Governor Christopher Waller adopted a similar stance, hinting that he will vote to hold steady on September 16, reasoning that a single 25 basis point move wouldn’t do much about inflation anyway.

Making matters a bit tougher for the no-hike wing was an August jobs report that landed at +162,000 against consensus for 53,000 and a 12-month average of 31,000 (though the details under the hood aren’t quite as encouraging, with strength potentially boiling down to quirks in survey timing).

Perhaps somewhat predictably, President Trump jumped in on the back of this report to remind everyone that a “STRONG COUNTRY MEANS A LOWER INTEREST RATE”, threatening to stop trading with countries against which the US runs a trade deficit (so…all of them?) if the Fed does not lower interest rates soon.

As usual, the US wasn’t the only one with surging rates, as the Japanese 10-year touched 3% for the first time since 1996 and 10-year gilts broke out to their highest level since August 2007.

Interestingly, Bessent chimed in again here to suggest that he has “information that the market doesn’t have” about Tokyo’s intentions while publicly leaning on the BOJ to “do the right thing” by hiking rates. Totally coincidentally, the Yen strengthened aggressively on the week.

In other signs that the Rules Based Global Order is going just great, European Commission President Ursula von der Leyen wants the continent’s “lazy” household savings put “to the service of European companies” through new securitization programs, suggesting the You Will Own Nothing phase is getting closer (we promise the You’ll Be Happy part will be right around the corner).

Not helping matters there were European natural gas prices blowing out this week to the highest in nearly three years. Storage is running at 65% of capacity against 77% at this point last year, the lowest reading for the date since the series began in 2011, which leaves the continent very little margin heading into winter.

Turning to the engine on which it increasingly looks like the whole plan lives or dies, OpenAI’s GPT-6 Astra blew away most expectations this week, posting benchmark results well ahead of even Anthropic’s most recently released Fable 5.1 model.

The company’s President Greg Brockman said this release effectively represents AGI, and while we imagine there is some definite book-talking here, it’s notable that this is not the model on which the company recently paused training due to security concerns, a tacit confirmation that the frontier labs have checkpoints well ahead of what the public can access.

Almost perfectly timed with the Astra release, Senator Bernie Sanders announced a bill to ban artificial superintelligence outright and pause frontier development until a monitoring agency exists.

As support for the industry continues to separate along party lines, the Trump administration filed a brief supporting OpenAI against the New York Times, arguing that any trial result deeming model training to be copyright infringement would cut against US national security interests, which is to say clearing roadblocks so the frontier labs can keep improving.

President Trump was characteristically direct about his support for the industry, warning that communities which turn down data centers will end up living in a van down by the river while emphasizing his view that AI is America’s Golden Goose.

Depending on the path of operating cash flows at the hyperscalers (which have thus far been funded the majority of the buildout and could continue to do so if they accelerate to the degree that AI maxis predict), that federal support may need to get more concrete and monetary, as some estimates now suggest hyperscaler + Nvidia debt issuance for AI builds is running at ~70% of new 10-year Treasury issuance.

Bitcoin, meanwhile, broke the $80,000 level again and continues to hover right around there as of this writing, with spot ETFs pulling in over $1 billion in the last two days, good for their largest haul since January (nb: this whole thing generally works better if you buy before it moves up 25%). The ETF complex is now within spitting distance of flipping to positive flows for the year overall, a pretty notable achievement given the abysmal price action in the first half of this year.

Bitcoin treasury bellwether Strategy also resumed buying for the first time in two months, adding over 4,600 bitcoin at an average of ~$80,000.

Regulatory Update

The National Sheriffs’ Association dropped its opposition to the CLARITY Act and moved to neutral, having previously argued the bill would make illicit finance harder to prosecute.

SEC Chair Paul Atkins now expects a vote on the bill this month, with cloture still on the calendar for September 15.

But that may be a tough ask given House Republicans have cancelled the last two weeks of their September session, leaving town on the 17th and not returning until after midterms mid-November for a lame duck session.

Noteworthy

A huge wave of database breaches landed this week, starting with Dropbox, which said roughly 5,000 accounts were compromised through a legacy Lenovo ID integration that lacked two-factor authentication.

Even worse was the reveal of a darkweb service that appears to be selling 153 million driver’s licenses, the latest sign both that KYC/AML laws are mostly a net danger for the average American, and the latest warning shot that AI is about to totally upend all assumptions about cybersecurity.

River published a report framing the path to a bitcoin price of $840,000 by the end of the decade and arguing for a 10% portfolio allocation.

Just a few weeks after the “Batch Zero” process for large data center applications was disrupted by an audit demanded by Texas Governor Greg Abbott, Texas grid operator ERCOT privately completed its first screening of ~300 applicants representing ~200 GW of prospective demand.

Mario Draghi famously committed to “whatever it takes” with fairly mixed results for the EU; now we get to see if Scott Bessent will have any better luck in the US. Per “sources,” the Treasury Secretary is ready to use any means necessary — including the nearly $1 trillion bazooka of the Treasury General Account — to fund long-end buybacks in an attempt to neutralize the so-called (and, if the last 15 years are any indication, potentially nonexistent) Bond Vigilantes. While Bessent did not explicitly confirm any of this himself, he was much more forthright about the US’s new colorfully-titled sanctions campaign “Operation Economic Outcast,” a sweeping set of penalties on various channels of Iranian commerce and, importantly, secondary sanctions for any institutions (Chinese or otherwise) doing business with the regime. Admittedly, prior rounds of tough talk like this from previous administrations didn’t accomplish much, though we think there’s a decent argument that those campaigns weren’t particularly serious about dismantling the financial reach of the IRGC machine that seems to extend well beyond Iran, and in our view that’s where the buyback / TGA story links up to the Middle East. With the federal debt and deficit where they are, the administration will likely need every tool in the toolbox to manage the US Achilles Heel of Treasury volatility (and its conjoined twin of equity vol) so as not to get shaken out of the broader Global Economic Reordering trade that we think is taking place. Our geopolitical read is worth roughly what you paid for it, but a cascade of headlines this week do seem to suggest that more pieces essential to this trade may be falling into place, as rising oil volumes through the Strait of Hormuz and a massive new US oil deal with Venezuela lay the groundwork for structural downward pressure on US energy prices (ultimately a key input to where long-term yields shake out).

Which brings us to Wall Street legend Stanley Druckenmiller, who used an op-ed this week to argue that the Treasury should “let the bond market speak,” calling the buyback program a form of yield curve manipulation and a grave mistake by his fellow Soros mentee. Far be it from us to take the other side of Druck, who to his credit has been right on the long-run fiscal math for 15+ years, but letting the bond market freely price risk is an easier call to make when debt to GDP isn’t already pushing 100% with nondiscretionary federal spending about to outstrip annual tax receipts; it’s a tougher act to pull off with the budget already on a knife’s edge, hegemony hanging by a thread, and the whole thing banking on a “run it hot” agenda that juices GDP and can’t afford a sudden 10-year spike to 6%+. Druckenmiller makes the point that the buybacks look like the beginnings of the yield curve management used to anesthetize markets during World War II, and we think that analog may be more apt than he realizes; if we pull back and survey everything we’ve seen the past 18 months (with further evidence this week from Operation Economic Outcast), we seem to be dealing with decision-makers who believe themselves to be on wartime footing. Reasonable people can debate whether that’s actually the right stance for the future of the US, but we think that reality helps to explain not just the buyback and TGA rhetoric, but also the current administration’s interest in stablecoins (which we increasingly think should just be understood as spendable T-bills) and continues to point in one very clear, very orange direction.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

Giga Energy CTO Angad Sandhu published an essay on how labor availability has become the binding constraint on data center construction, ahead of both chips and power, and why that makes Giga’s modular manufacturing approach especially attractive.

Giga’s CBO Matt Prusak joined the Blockspace show to discuss evolving time-to-token considerations for HPC sites.

Market Updates

Treasury came out swinging this week, as two anonymous senior officials suggested that the roughly $950 billion sitting in the Treasury General Account will be available to fund larger buybacks of older 10- to 30-year paper beginning next month, which would let Treasury repurchase the long end without directly issuing bills to pay for it (even if that’s a bit of stretch as cash is fungible and underlying financing needs aren’t changing).

The message was reinforced by another unnamed source who said Treasury Secretary Scott Bessent is ready to do whatever it takes to keep yields where they need to be. (Ten31 has obtained what we believe to be an exclusive first look at the source of that leak.)

Renowned fund manager, terror of the Bank of England, and former Bessent colleague Stanley Druckenmiller took to the Wall Street Journal to express — with maybe a little too much help from his old pal Claude — his dissatisfaction with this whole plan, calling the program a mistaken act of price management and imploring the Treasury to “let the bond market speak.”

Undeterred by his old boss, Bessent rolled out “Operation Economic Outcast” on Monday, the long-threatened Double Secret Sanctions targeting more than 60 entities across five Iranian financing avenues with an explicit secondary-sanctions threat for countries working with the regime. Tellingly, Bessent implied that even China will not be exempt from these measures, suggesting that “no one is above the reach of US sanctions” when asked specifically about the Chinese.

The announcement included a promise that a major financial institution would be removed from the dollar system within the week, though as of this writing it still wasn’t clear who’s getting a tap on the shoulder.

The new economic pressure coincided with some potential cracks in the façade of the Iranian negotiating position, with a faction of Iran’s senior civilian politicians (mostly the ones outside the IRGC mafia) publicly urging an end to the war, and President Masoud Pezeshkian arguing it’s better to deescalate now while Tehran can still claim to be doing it from a position of strength.

Parliamentary Speaker Mohammad Ghalibaf — who has done a commendable job of matching Trump blow for blow in the Great Shitposting War of 2026 — went further, acknowledging that Iran cannot endure if its people have to absorb too much economic disruption, which promptly earned him hardliner accusations of defeatism.

Not helping the radical element was new UK Maritime Trade Operations data suggesting the Hormuz disruption may be fading, with transiting vessels up 5x in two weeks to roughly 200 via the Omani route, still only about 20% of prewar traffic but headed in the wrong direction for anyone counting on the chokepoint as durable leverage.

Goldman’s read on the state of play was even more generous, pegging oil flows through the Strait at roughly two-thirds of prewar levels as dark crossings and ship-to-ship transfers continue to pick up more slack.

Washington seems to agree that the most acute phase has passed, as the State Department is reportedly preparing to return evacuated diplomats to their posts across the region.

Elsewhere on the oil backdrop, President Trump announced the “BIGGEST OIL DEAL IN WORLD HISTORY” on Friday night in the form of a broad agreement with Venezuela that will give the US access to fields holding some 65 billion barrels of proven reserves, more than doubling potential reserves available to the US overnight. Notably, per Axios, many of the associated assets were previously controlled by entities linked to China.

On the same thread, Chevron, Halliburton, and other US energy firms are reportedly in advanced talks as part of a separate deal to invest billions into greenfield deployments in Venezuela.

On the trade front, the White House published “The Great Transshipment Scam,” a broad accounting of how countries (read: China) use intermediate waypoints to duck US tariffs at a cost of as much as $150 billion in lost GDP. The veracity of these estimates aside (your GIGO alarm should probably be going off), the report presumably lays the groundwork for tougher rules across the US trade sphere.

And it’s a particularly notable report given commentary from the US Trade Representative’s office that the Canada deal came apart last week over precisely the transshipment issue.

Closer to home, July PCE came in a touch above consensus at 3.7% headline against expectations for 3.6%, with core holding at 3.3% Y/Y.

Cleveland Fed President Beth Hammack, who dissented in July’s 9-3 FOMC vote, used the print to argue that now is the time to act on raising rates, while conceding that a single 25 basis point move “probably doesn’t do a whole lot for the economy.”

New Fed Chair Kevin Warsh positioned himself directionally the same way at his first Jackson Hole conference, warning that if underlying inflation isn’t moving to target at sufficient speed, the Fed still has work to do. The perceived hawkishness did the long-end management project no favors, pushing the 10-year back up toward the top of its recent range, though the MOVE Index (our north star for the administration’s ongoing game of chicken) stayed muted all week.

Turning to the other major capital sink competing for the long end’s attention, Nvidia announced a $6 billion deal with AI startup Poolside to license the company’s software in pursuit of an open source model ecosystem to rival the open models coming out of China (and, it should be said, the closed frontier models built by some of Nvidia’s biggest customers).

Just a couple days later, credible reports hit that the company is also closing in on an acquisition of Hugging Face, widely considered to be the “GitHub for AI” (despite its Lovecraftian name which your humble author believes may be among the worst startup names of all time). Taken together, the two headlines are the strongest confirmation yet that the most powerful name in AI sees open source models as a national strategic imperative (and it probably doesn’t hurt that they’re the best check the company has against the long-run threat of monopsony).

The AI bellwether then went on to post a blowout earnings report, including $96 billion of revenue at a 66% operating margin and guidance of 70% growth next fiscal year, a growth pace essentially unheard of at this scale (and, depending on your priors, either the latest confirmation of the Singularity or the last gasp before the “circular financing” scheme finally cracks).

The compute land grab continued apace as Anthropic and NScale struck a $45 billion, six-year deal for 460 MW at NScale’s West Virginia site, part of a 2 GW first phase running on Nvidia’s Vera Rubin racks.

Anthropic and Salesforce also announced Claudeforce, which drops Claude into Salesforce’s reasoning engine and makes it the default model across Slack, an update which may warrant some recalibration of the SaaSpocalypse narrative.

In less rosy news for the AI Millenarians, OpenAI and METR published a postmortem of the Hugging Face breach that reads like LessWrong fanfiction, in which roughly 1,200 agents in an OpenAI cyber eval autonomously coordinated an attack on Hugging Face production containers.

OpenAI responded with the classic Two Week Pause™, shelving its largest planned reinforcement learning run after determining its Astra model may meet critical cybersecurity capability thresholds. Sam Altman then warned the world that “there is not much time to act” on shoring up cyber defenses, while assuring readers that we’re all trying to find the guy who did this.

But nevertheless, it seems like the show must go on, as the Wall Street Journal ran a feature on the backlash to the backlash over data centers, with the IBEW, the world’s largest labor union of electricians, circulating a memo urging members to oppose local moratoriums and various construction trade groups threatening to withhold support of candidates who want to slow the buildout (the weirdest thing about the Singularity so far may be that it has brought Jeff Bezos and the average Yellow Dog Democrat under the same tent).

Bitcoin, meanwhile, continued its upward momentum for most of the week, breaking $81,000 for the first time since the spring before dropping back under $80,000 on Warsh’s inflation finger-wagging, with sentiment gauges tipping into extreme greed on the way up.

Regulatory Update

The SEC sent its proposed institutional custody rules to the White House OMB on Monday, the first formal step toward a framework for investment advisers holding bitcoin on behalf of clients and a reasonably clean marker of how far the agency has traveled since the last administration.

The OCC and FDIC separately proposed narrowing what counts as an “unsafe or unsound practice” in regulatory evaluations of banks’ risk controls, which should make the phrase considerably harder to deploy as a vague pretext for leaning on banks with digital asset customers (so Operation Chokepoint 3.0 will need to find some new vocabulary).

Noteworthy

Bitcoin executed its first quantum-resistant transaction on mainnet this week with no soft fork required, as StarkWare’s Avihu Levy used signature grinding to move funds out of a vulnerable output, a demonstration that the existing protocol rules already leave theoretical room to defend against a threat that most observers assumed would need a consensus change.

Building on last week’s Blockstream work on hash-based signatures, Jonas Nick and Mikhail Kudinov published a formal BIP to codify the implementation of SHRINCS, a hash-based post-quantum scheme with better throughput than several alternatives and which is already running in production testing on Liquid.

Core Lightning disclosed multiple vulnerabilities surfaced during a 10-day flood of AI-generated bug reports, with operators urged to upgrade immediately (though no funds have been reported lost so far).

It was an eye-popping $40 trillion dollar number that grabbed many of the top mainstream headlines this week, as the US officially crossed the threshold of doubling its outstanding federal debt in just a single decade, but it was a measly $4 billion figure that really got markets moving. With long-end Treasury yields pushing into uncomfortable territory once again, Scott Bessent’s Coupon Cleanup Crew announced plans to increase the size of the US Treasury’s ongoing bond repurchase program from $2 billion per month to at least $4 billion per month beginning in September. The financial press made much hay over the fact that this announcement’s positive impact on long-end yields was short-lived and fully reversed within 24 hours, and many were quick to jump to the conclusion that that means the printer (now helmed by a Trump ally and former Bessent colleague) must be right around the corner, or else that the US debt death spiral has officially begun and the collapse of the dollar is just around the corner. All this helped push the debasement trade out of de basement (I’m sorry, I’ll show myself out) as gold and bitcoin both had banner weeks.

As bitcoiners, we won’t look a gift horse in the mouth — particularly when he comes bearing a $16,000 weekly candle, good for 1 whole bitcoin market cap at this time four years ago — but we’d posit that some commentators may be jumping the gun on the implications and transmission mechanisms here. If you think the current administration is intent on a “global economic reordering” (a prospect about which its leading Bond Salesman has been quite explicit and which seems to be supported by virtually every policy decision of the past 18 months), then what you need is not to solve America’s long-run debt burden tomorrow, but just to keep the fiscal picture manageable long enough to claw back the strategic industrial capacity needed to reestablish hegemony (and maybe to re-shore the eurodollar system that is now bigger than the officially recognized dollar market while you’re at it). In that case, the operative question is not whether Bessent can buyback his way back to ZIRP, but rather how big the buybacks need to be to keep the largest marginal source of long-end buying (not the Fed, but US investment funds) at the table so volatility doesn’t get too far out of hand (and once again, we’d note that the MOVE Index remained pretty calm all week). That number may be higher than $4 billion per month, but our sense is it’s not $100 billion, so we wouldn’t bet on the administration getting shaken out of its main existential trade just because of long-end rates.

To be clear, the US no doubt has an unavoidable long run fiscal math issue (which we’ve addressed extensively in this newsletter), and sudden nonlinear changes in the strategic picture could force Washington’s hand back into its century-long failure mode of printing the difference. But we think it’s worth readers considering that there may be more than one way to skin the cat of fiscal dominance, and it may involve structural changes to the dollar system that sit outside the familiar toolkit of a new Federal Reserve alphabet soup facility. Fortunately, we’d argue hard assets ultimately have a central role to play in either scenario, which makes the timing of revived Presidential allusions to the US buying more bitcoin particularly noteworthy this week.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz to learn more and get in touch about participating.

Media

AnchorWatch Co-Founder and CEO Rob Hamilton joined the Galaxy Brains podcast to discuss the latest developments in the Bitcoin Red Team cybersecurity initiative.

Market Updates

After a steady climb in the long end throughout the summer, the US Treasury decided enough was enough this week, announcing a doubling of the maximum size of its buybacks of 10-year and 30-year bonds, from $2 billion to at least $4 billion per monthly operation beginning in September. The all-caps DOUBLING headline splashed across many Twitter feeds was no doubt eyebrow-raising, but we’d flag that the amounts at play here are still a drop in the bucket relative to Treasury’s ultimate headroom if it really wants to get frisky.

Yields kneejerked down for approximately one session, with the 30-year giving back more than 10 basis points on Wednesday before rates edged back higher on Thursday as traders finished doing the arithmetic and came to the conclusion that some of that extra headroom may need to get used sooner than later.

Secretary Scott Bessent evidently agreed, taking to CNBC the following morning to emphasize the operation could run much higher than $4 billion per issue and that Treasury has “a big toolkit” for dealing with the long end, a reassurance the 10-year rather pointedly ignored by erasing all of its gains from the prior day while he was speaking.

Poetically, total public debt outstanding crossed $40 trillion within the same 24 hour period, having roughly doubled since January 2017 across two administrations united in the bipartisan view that the other guy should be stuck with the tab.

Bessent’s view is that there’s nothing magic about that $40 trillion number and that “we can grow our way out of this,” which might have triggered some longtime Timestamp readers into the Leonardo DiCaprio pose.

He went even further on Thursday, telling CNBC there’s a “very good chance” the deficit has already peaked under this administration, a bold top-tick call against last week’s record July deficit of $432 billion.

Whatever the trajectory of the deficit, President Trump was once again clear about where he’d like the vig on it to be, reiterating that the US “should be paying much less” in interest expense and that the Fed’s board is overly political — while taking care to note, again, that his Number One Boy Kevin Warsh is doing a great job.

As Treasuries looked to recover from their latest bout of queasiness, the already challenged private credit backdrop got even murkier with the news of a federal probe of Dodgers owner and insurance magnate Mark Walter, whose TWG Global agreed to swap out as much as $6.5 billion of related-party private credit investments held at Delaware Life amid SEC and SDNY scrutiny of potential self-dealing.

The ultimate blast radius here remains uncertain but is already spreading, with bonds issued by Sammons Financial Group — a $135 billion life insurer whose parent holds a non-controlling minority stake in Guggenheim — blowing out some fifty basis points in a week on the back of a short seller’s report.

Away from the credit complex and despite some solid recent data on inflecting wage growth at the lower end, Walmart’s latest earnings release pointed to a more cautious American consumer, with US comps up just 2.6% (the softest rate in over six years) even as the company raised full-year guidance.

In a similar vein, July single-family housing starts fell nearly 10% to 808,000, the lowest level since November 2022, with mortgage rates parked near a still-restrictive 6.8%.

On the Iran front, the President took to Truth Social to promise an “ECONOMIC D-DAY” (with particular focus on the third countries, exchange houses, ship registries and front companies that make Tehran’s oil trade function) days after the UAE suspended trade with Iran outright.

Secretary Bessent once again popped his head out to suggest that this new round of economic pressure means “likely there will not be a large-scale kinetic restart” and that we’ll get more details on Monday. Reasonable readers could interpret this as laying the groundwork for a graceful de-escalation where the US gets to claim an economic win without scoring a decisive military victory, but we’d still bet that the last chapter of how this episode plays into the global economic reordering has not yet been written.

Energy markets remained fragile but took the escalation in stride, with commercial crude stockpiles posting an above consensus weekly build of 4.4 million barrels (vs expectations for a 1.6 million barrel drain), landing right in line with the five-year seasonal average.

That marginally better inventory picture may owe something to the midnight runs the US has apparently been operating in the Strait of Hormuz, where Axios reports a US task force has been using the secret weapon of checks notes the dark to shepherd 15-20 tankers per night down the Omani coast, good for roughly 10 million barrels a day or about half of prewar output.

Elsewhere in US gambits for rearranging the security map, the President ordered Defense Secretary Pete Hegseth to substantially reduce the US’s annual joint exercises with South Korea, calling them “totally inappropriate and hostile” toward North Korea, which is after all a swell neighbor and paragon of good faith diplomacy.

Some relevant context for the superficially baffling decision came a couple days later in the form of Chinese Foreign Minister Wang Yi visiting Seoul for the first time since 2021 to meet with the relatively new Lee government, which has signaled more warmth toward Xi than the White House may like.

And speaking of China, Mexico is reportedly weighing tougher anti-dumping measures on Chinese steel and vehicles as President Claudia Sheinbaum works toward a multi-year USMCA extension, a US leverage point we’ve been flagging for much of this year.

To the north, the US enacted a three-day pause of its 50% tariffs on some $20 billion of Canadian exports minutes before the deadline, with Trump linking the reprieve to a Keystone XL pipeline that “may be awoken from the grave.”

But as often happens on the rocky road to achieving an Artful Deal, negotiations fell apart at the eleventh hour, and the US moved forward with its planned tariffs starting Saturday morning.

As the world awaits the IPO of arguably the two most important companies in the US later this year, new reporting this week suggested Anthropic’s annualized run rate reached $65 billion at the end of July, a number almost nobody would have believed 9 months ago when the company was hovering under $10 billion of ARR, yet one that still landed short of the buyside whisper and drove some renewed consternation across the AI-levered complex.

Bitcoin, meanwhile, did bitcoin things, breaking back above $70,000 for the first time since early June in one of the largest short squeezes in the asset’s history. The corn even made a run at $80,000 on Friday morning.

Regulatory Update

The OCC granted preliminary conditional approval to World Liberty Financial, the Trump-affiliated “DeFi” entity behind the USD1 stablecoin, to operate as a national trust bank issuing and custodying digital assets (though the charter is conditional and the bank can’t yet open its doors).

Meanwhile, the US Comptroller of the Currency indicated that over half of new OCC bank charter applications now include some digital assets component, up eightfold from the Biden administration.

Having punted the closely-watched CLARITY Act vote past the August recess, the Senate now has cloture on the calendar for September 15, and White House digital assets adviser Patrick Witt says he remains “optimistic and bullish” on the bill clearing this year.

When asked about the US acquiring a “sizable amount of bitcoin” at a White House digital assets summit this week, President Trump said that “[he] would certainly listen” to recommendations, adding that bitcoin has “been very, very good for the dollar.”

Noteworthy

A new Blockstream Research report showed that hash-based signatures that could offer future quantum resistance for bitcoin transactions can be reasonably produced on at least four of the most popular bitcoin hardware wallet models, which is notably positive given that the potential unwieldiness of these signatures has been a point of concern among industry observers.

The summer doldrums seem to have set in for the US-Iran conflict, which for the moment appears to be in a Sisyphean stalemate between two sets of abnormally large egos volleying “I know you are, but what am I?” back and forth without much progress. That said, although transit through the Strait of Hormuz once again declined to multi-month lows, it was yet another strange week for those members of the Twitterati who have been assuring the world that the US will have to cave any day now because its overfinancialization can’t handle the disruption: despite the uncertain outcome, bond volatility has continued to compress as US equity markets continue to make new highs every week. To be sure, you can’t eat Nvidia shares, and many of the machinations needed to keep this flywheel going no doubt have downstream real-world impacts (see: SPR lows, inflation well above 2%); however, it’s increasingly tough to argue that financial market sensitivity is by itself an unmitigated binding constraint that will imminently force the hand of the most powerful global hegemon in history. November’s midterm elections may be a more significant near-term roadblock for the administration’s ambitions, though we’d flag that both the YTD reacceleration of wage growth for the lower- and middle-income terciles as well as Elon Musk’s reported $100 million+ midterm advertising blitz may tilt the board more in favor of a counter-consensus outcome there. In any case, though, the simplistic narrative about the US’s positioning seems harder to defend by the week, and we think the degradation of that story continues to point to a much more structural and long-term shift; and if that’s the case, it’s worth asking what it means that one of the chief architects of that shift is out here quoting Satoshi.

Selected Portfolio News

Maple AI added support for DeepSeek-V4-Flash and Kimi K3 models:

Media

AnchorWatch Co-Founder and COO Becca Rubenfeld appeared on Bloomberg to discuss the fallout of the Coldcard exploit and its implications for cybersecurity going forward.

Ten31 Managing Partner Marty Bent led a discussion with Cholla Energy Founder Gideon Powell on energy maximalism and grid resiliency at the Institute for Humane Studies.

Market Updates

It was Groundhog Day again in the Middle East, where talks between the US and Iran continued to range anywhere from unproductive to nonexistent as an American ship fired on a vessel attempting to break its blockade while Houthi strikes killed six in the Red Sea.

The IRGC and President Trump fought for the upper hand in this ongoing BS competition, both insisting that they’re in control of the region, while the President teased plans to turn the Strait into another US territory once this is all over (we can only assume blueprints for the Trump Kharg Island are already in the works).

Treasury Secretary Scott Bessent responded to the latest agitations with an announcement that the US will soon hit Iran with the dreaded Double Secret Sanctions, driving “economic isolation like the world has never seen before.”

Whoever actually has the upper hand, shipping traffic through the Strait sank back toward 3-month lows, though oil remained fairly rangebound and well off YTD highs (at least partially due to ongoing strategic petroleum reserve drains worldwide, which have put US stockpiles at their lowest level since 1983). At the same time, the S&P500 notched yet another all-time high.

Importantly, the MOVE Index – a closely watched measure of volatility in US Treasuries – continued its recent downtrend despite the protracted uncertainty in the Gulf.

The latest inflation data gave the bond market a little more support on the margin as well, with CPI printing in line with consensus at 3.4% (remember when the target for this manipulated hedonically adjusted figure was 2%?) and PPI coming in below expectations (though still at a less than flattering 4.7%).

It remains an open question how long this metric can stay in high but not catastrophic territory, and that dynamic (specifically its ultimate impact on rates) gets more important every month as the US continues to post historic deficits, with July’s figure of $432 billion marking the highest July print ever and the widest monthly gap since early 2021.

Most notably, total YTD interest now sits at $1.2 trillion, officially surpassing both defense and Medicare spending on the year. As we’ve written elsewhere, we wouldn’t count out the “run it hot” playbook as a means of extending and pretending here, but that has yet to push nominal GDP anywhere close to where it needs to be for the gambit to work out.

Speaking of ramping up spending, the Department of War made a new $400 million investment into an Australian scandium miner, the Pentagon’s latest foray into direct equity ownership of companies that may chip away at China’s critical minerals dominance.

As the globalization mirage continues to fracture, China announced new travel rules that will restrict citizens with potentially sensitive technology and engineering expertise from leaving the country.

Meanwhile, US Commerce Secretary Howard Lutnick has reportedly “encouraged” Apple not to buy from Chinese memory giant CXMT (which recently went public in a massive IPO) as a solution to the multiyear DRAM crunch.

Perhaps most notably on this theme, Reuters reported that the US is preparing to tell members of the “Pax Silica” semiconductor framework that they must exclusively commit to the US-led initiative and reject any alternative framework or coalition proposed by Beijing.

New data from Bank of America pointed to the economy becoming less “K-shaped” in recent months, with both wage growth and discretionary spending among lower income cohorts surging to converge with or surpass that of the top cohorts.

Readers will have to take their own view on whether the AI buildout supports that trend (ripping demand for skilled trades) or cuts against it (Dario says we’re all about to join the permanent underclass once Claude can swing a hammer), but in either case the week offered no signs that that’s slowing down, as Nvidia announced a massive program with six of the largest asset management firms to offer up to $500 billion of third-party AI compute infrastructure financing.

Many opinions on what this suggests about where we are in the cycle could be reasonable, but we do hope that this development and CoreWeave’s announcement that it will be leasing A100s (an Nvidia GPU that was launched in 2020 and is now essentially 3 generations behind) through 2029 at least retires the “understated depreciation schedule” trope about accelerators.

But alongside sustained momentum for the buildout came more tailwinds for “AI safety oversight”, as Google’s Chief AI Scientist Demis Hassabis reportedly held talks with the major AI labs and government officials including Scott Bessent on the creation of a new public/private AI regulatory body.

While the world understandably continued to look elsewhere, bitcoin kept consolidating in a very narrow band around $64,000, with the orange coin’s 30-day volatility compressing to multi-year lows.

The latest 13F season brought forth a couple notable updates here, with Tudor Investments increasing its IBIT holdings by close to 20% in the second quarter, while Abu Dhabi’s sovereign wealth fund Mubadala held pat on its bitcoin position, currently the second-largest holding in its publicly disclosed portfolio (which remains notable given both the Q2 price action and the broader disruption affecting the Gulf states this year).

With relatively little fanfare, BlackRock significantly reduced the threshold for in-kind conversion (the mechanism by which a client can swap between bitcoin and IBIT without a tax event) to just $1 million from $25 million previously, noting that it ultimately aims to offer this capability at any size.

Bitcoin treasury stalwart Strategy sold another ~1,600 bitcoin on the week, though CEO Phong Le indicated the company plans to resume bitcoin accumulation by the end of the year.

Regulatory Update

The Bitcoin Policy Institute submitted an open letter to policymakers (on which Ten31 was one of ~80 signatories) regarding the need for easier access to frontier models for defensive cybersecurity applications, a gap that was painfully highlighted by the Bitcoin Red Team’s attempts at urgent white hat security audits over the past several weeks.

Noteworthy

The Bitcoin Improvement Proposal BIP-110 – which sought to “limit arbitrary data storage” in bitcoin – caused a chain split, with the new chain stalling out at two blocks and the main bitcoin chain continuing without issue. Longtime readers may note that this is approximately the second time we’ve mentioned this proposal in this newsletter over the past year, and we think this week’s events validate that that level of coverage was roughly commensurate with (or perhaps even excessive relative to) the long-term relevance of this story.

In a totally healthy development, new data this week from wealth management platform Betterment suggested Gen Z is increasingly using sports betting and prediction markets as key bulwarks of its collective portfolio.

Don’t look now, but the whole “running it hot” thing may have some legs. The latest ISM Manufacturing PMI data came in very strong this week, confirming a solid S&P report from last week. At the same time, trucking company earnings call commentary about freight volumes starting to clearly break out of a multi-year trough also pointed to renewed signs of life in the manufacturing and core industrials sectors that are the lynchpin of much of the current administration’s economic policy focus. Whether that continues and actually ends up flowing through to meaningful and durable GDP growth (read: tax receipts and growth-based deficit reduction) is still anyone’s guess as we’re still quite a ways off from the goals of the widely touted “3/3/3 Plan”, but it’s getting harder to deny that there are some green shoots sprouting up in US heavy industry for the moment. Initiatives like SpaceX’s $17 billion Terafab facility and 8GW of incremental HPC capacity coming online next year may deserve an Elon-sized asterisk (his timeline for putting a man on Mars was juuuust a bit outside), but even a delayed version of projects like that will only further pour fuel on this fire.

Of course, arguably the key tailwind for much of that industrial activity is the unprecedented data center buildout to support artificial intelligence, and some of the potential downside consequences of that technological shift have been on full display in the bitcoin ecosystem over the past week, as the tragic Coldcard exploit was followed by what appears to be a series of AI-assisted attacks on a variety of bitcoin services and open source projects. That said, we would note that the ecosystem has shown remarkable resiliency across these episodes, as evidenced most clearly by the organic emergence of the “Bitcoin Red Team,” a volunteer group of bitcoin technical experts (loosely led by AnchorWatch CEO Rob Hamilton and several other key developers in the space) focused on aggressive and swift reviews of hundreds of bitcoin codebases amplified by open source AI models. The episodes of the past week have undoubtedly been painful and difficult, and we would expect that they represent something like the starting gun for a new era of cybersecurity generally, which will demand a much more proactive and AI-native approach; however, one silver lining from this period is the clear validation of bitcoin’s antifragility and the hardening of the project’s overall security stack that we’re watching emerge in real time.

Selected Portfolio News

Unchained added support for Slipstream, a direct miner-submission service operated by MARA that allows users to avoid potential risks of broadcasting multisig transactions with compromised private keys:

AnchorWatch waived its custody fees for 60 days for new accounts as many users look to migrate to new setups:

Fold announced a partnership with Lead Bank:

Media

AnchorWatch’s Co-Founders Rob Hamilton and Becca Rubenfeld were featured in a Bloomberg report covering the Coldcard vulnerability and the bitcoin community’s Red Team response to harden the broader ecosystem.

Rob also appeared on the Bitcoin Policy Institute podcast to discuss his work on the Red Team project and the future of open source software in a world of powerful AI models.

Strike published an article on the company’s long-running internal red-teaming procedures for testing its infrastructure.

Giga Energy CTO Angad Sandhu (former director of data center infrastructure at Google) published an article on Giga’s differentiated, end-to-end approach to data center buildouts.

Market Updates

In a pattern that may sound just a bit familiar to longtime Situation Monitors, the Trump administration spent the week hinting at another Iran deal just around the corner, only for nothing to materialize ahead of the weekend.

Various reports suggested that Iran and Oman are in talks on their own deal for shared control of the closely watched Strait of Hormuz – a deal that would allegedly restrict US and Israeli access to the Strait – though we wouldn’t put strong odds on that one getting through.

Regardless, markets responded to the prospect of the concept of a framework of a deal with “so you’re telling me there’s a chance?” once again, as the S&P500 made new all-time highs while both oil and 10-year yield both continued declines off recent spikes.

Amid the protracted disruption in the Middle East, the US officially imported zero oil from Saudi Arabia in July for the first time in four decades (with much of the delta backfilled, notably, by Venezuela).

Following much speculation last week, Treasury Secretary Scott Bessent confirmed he coordinated with the Bank of Japan to tame “disorderly Yen activity” following the Japanese currency’s decline to 40-year lows against the dollar.

The move only popped the Yen back to roughly May levels, so we have a feeling this isn’t the last coordinated action we’ll see here near-term, and it appears Bessent may agree, as he publicly called for the FIMA Repo Facility to be expanded to provide more firepower for these types of currency interventions. Notably, the facility is actually a program administered by the Federal Reserve, so Bessent’s exhortations here could present an interesting new chapter in the relationship (dare we say, accord?) between the two institutions.

Also of note, the Fed in this case sold euros, not dollars, for the operation, a move that appears to be effectively unprecedented in the history of these interventions, reportedly blindsided officials at the ECB, and represents the latest instance of the US socializing the downsides of its machinations disproportionately onto “middle powers” like Europe.

As Bessent menacingly says “that’s a nice independent monetary policy you’ve got there” to the folks in the Eccles Building, the mainstream financial press appear to have gotten their marching orders regarding new Fed Chair Kevin Warsh, with pretty much every outlet now echoing the sentiment that “experts say” and “sources familiar with the matter report” that Warsh has already lost credibility on inflation after holding rates steady at his first FOMC meeting.

The President seems interested in giving journalists even more fodder on this front in the near term, as he revived suggestions that he’s considering firing Fed Governor Lisa Cook once again, though it’s not entirely clear what legal mechanism he’d use to do so following a recent injunction that kept Cook in place.

Whatever the state of the central bank’s credibility, the latest jobs figures this week did not make the pundits’ case much stronger, as July’s Non-Farm Payroll numbers came in well below expectations with a decline of 23,000, plus a downward revision to June’s numbers.

That said, the July ISM Manufacturing PMI confirmed S&P’s solid reading from last week, coming in at a four-year high of 55.6 on the back of declining business inventories, higher factory hiring, and strong new orders growth.

In the same vein, Q2 results from the major US trucking and logistics operators generally came in quite strong, with management teams pointing to what looks like an emerging structural inflection in freight volumes.

It was once again a big week for AI – one of the key drivers of that industrial resurgence – as Elon Musk revealed more details on his $17 billion initial plans for SpaceX’s Terafab facility, an Elon-sized semiconductor foundry in Texas that would ostensibly be the “largest and most valuable building on earth.”

Elon may need to put in a word at the Capitol, though, as Texas Governor Greg Abbott called for an audit this week of all large loads in the state’s massive 474 GW ERCOT interconnection pipeline, an order that will indefinitely delay a variety of AI data center projects.

Those delays notwithstanding, the semiconductor industry and AI buildout are continuing to take center stage within the Trump administration’s strategic and reshoring agenda, with the White House implementing a new protectionist executive order for American polysilicon manufacturing while also reportedly considering another EO that would ban new imports of Chinese optical transceivers (devices becoming increasingly important for data transmission within the most advanced data centers).

That trend of nationalist AI industrial policy could make things a bit awkward for Oracle, whom the New York Times suggested may be indirectly supplying almost 25% of China’s AI computing power.

Elsewhere, new reports out this week indicated that the Trump administration’s AI guidelines will likely exempt US open source models from prerelease review by the federal government, placing the regulatory onus primarily on OpenAI and Anthropic.

We’d expect the calls for greater control over the ecosystem to probably get louder, though, as this week was filled with yet another flurry of reports on rogue AI deployments from all of Meta, Anthropic, and OpenAI.

Whether these reports are, to some extent, performative kayfabe intended to add credence to the case for greater regulatory capture by the big labs (e.g. the recently proposed “AI kill switch bill”), it’s clear that increasingly powerful AI models have driven a phase shift in cybersecurity assumptions, and unfortunately early signs of that were visible this week across bitcoin projects including Boltz, Zeus, and BTCPay Server, all of which were forced to temporarily suspend services or ship emergency patches in response to a wave of (presumably AI-assisted) attacks.

Encouragingly, a decentralized group of bitcoin ecosystem developers and founders – loosely spearheaded by AnchorWatch CEO Rob Hamilton – have stepped up to form the “Bitcoin Red Team,” an initiative focused on using the latest open source AI models to aggressively test and harden hundreds of bitcoin ecosystem technology stacks.

OpenSats has started a new Red Team fund specifically to support this effort, which we believe is one of the clearest examples of bitcoin’s fundamental antifragility in the protocol’s history.

Regulatory Update

The Treasury Department sanctioned two Iranian firms involved in the so-called “Hormuz Safe” protection racket insurance program that had attempted to collect bitcoin payments from vessels in the Strait in exchange for safe passage.

The US Senate officially delayed the next CLARITY Act vote until after the August recess, which likely materially reduces the odds of passage this year as midterms are set to take focus going into November.

Tyler Williams, the top digital assets adviser to the Treasury Department, announced his resignation this week.

Noteworthy

MARA’s Slipstream service, which allows users to submit transactions directly to the pool’s private mempool for inclusion in a block without the potential for “in-flight” attacks on compromised keys, has helped safely migrate over 5,600 bitcoin from multisig addresses since last week.

Michael Saylor’s Strategy sold another 1,688 bitcoin this week to fund obligations on its preferred stack, marking six weeks since the leading Bitcoin Treasury Company last bought bitcoin.

We unfortunately need to start this week on a somber note, as any bitcoin users in the audience should be aware of a critical security vulnerability affecting many models of the popular Coldcard hardware wallet. In short, most seed phrases generated on Coldcard firmware released after ~2021 can no longer be treated as secure, and we recommend near-term action for any Coldcard users. Much more detail on which setups and scenarios are most affected can be found here and here, but for the moment we recommend treating all wallets that depend on any Coldcard model (including multi-signature wallets that depend on a quorum of Coldcards) as potentially insecure and taking action to move funds as soon as practical. We’d stress that proceeding calmly is paramount at a time like this, and in many cases the best next move may simply be to transfer funds temporarily to a reliable exchange like Strike, Fold, or River. Collaborative custody providers like Unchained and AnchorWatch can also provide products and guidance to assist users with an orderly migration. There are many, many takeaways from this incident that will be hashed out over the coming weeks, but for purposes of this newsletter’s usual focus we’d just note that the discovery of the vulnerability (as well as its diagnosis and solutions) appear to have been materially aided by the latest open source AI models. We therefore strongly suspect that, while this situation is isolated to a subsegment of bitcoin, it is the harbinger of a much broader cybersecurity arms race that will have an expanding blast radius for traditional systems going forward.

The rest of the week also had its share of bleak points, including a resurgence of hostilities around the Persian Gulf (which even bled into Ukraine this time around), benchmark long-end yields breaking out to noteworthy new highs, and a cascading liquidation selloff in tech that threatened to push the Nasdaq into correction territory before San Francisco’s AI Golden Boy was summarily shown the door by New York’s Finest Market Maker (Leopold, we hardly knew ye). In our view, these headlines and more continue to point to a sclerotic system lurching toward a phase change that will feature some combination of monetary repression (though what exact shape that takes remains to be seen), an increasingly tight relationship between the state and private industry, and fracturing global trade relationships, all of which make an ongoing strong case for bitcoin’s role in the evolving order even in the midst of an extremely tough week for many individual bitcoiners.

Media

AnchorWatch Co-Founder and CEO Rob Hamilton – who has been instrumental in helping to diagnose the Coldcard vulnerability and helping users keep funds safe – joined Natalie Brunnell to discuss the evolving situation.

Strike Founder and CEO Jack Mallers also appeared on Natalie’s show and What Bitcoin Did to dig into his decision to step away from Twenty One Capital and what’s next for Strike.

Ten31 Managing Partner Matt Odell joined What Bitcoin Did as well to discuss the bitcoin bear market, bitcoin treasury companies, and more.

Market Updates

Like Lucy and Charlie Brown, the US and Iran once again gave the market some false hope to kick off this week, with the two sides declaring yet another peacefire as they looked to reopen negotiations.

Shortly thereafter, Iran decided you can’t have a good peacefire without a little surprise attack to keep things interesting, firing missiles at US bases late Tuesday night. President Trump responded as you might expect, scuttling any hopes for another artful deal near term.

In a potentially concerning development for anyone not interested in World War III, the conflicts in Ukraine and Iran briefly collided this week, as the embattled European country attacked an Iranian shipping vessel in the Caspian Sea, prompting IRGC threats of retaliation.

Amid the ongoing exchange of missiles and drone strikes, Axios (which is either a US-aligned propaganda outlet or a tool of IRGC subversion, depending on the day) reported intelligence suggesting that Iran is “more afraid of Treasury than the War Department” as recent Treasury sanctions have pressured domestic banks and made it more difficult to pay IRGC operatives.

To that point of financial warfare, President Trump said this week that frozen Iranian assets will be used to pay for repairs to any tankers and cargo ships damaged by recent strikes in the Gulf.

Extending the theme further, the Senate overwhelmingly voted to advance the “Lindsey Graham Sanctioning Russian Act”, which would give the President broad new powers to impose secondary sanctions on customers of Russian oil, including tariffs of up to 100% on all exports from Russia’s top customers.

It was also Fed Week once again, and as always there were no shortage of takes going into and coming out of the FOMC meeting. The President offered his own view early in the week, noting that new Fed Chair Kevin Warsh “wants to do the right thing” (pundits everywhere were mystified as to what Trump might have had in mind) but that he was being hamstrung by a Board that is “too political.”

As expected by most, the central bank held its benchmark rate steady at the meeting, though three members voted for a hike due to growing fears of inflation (this group predictably included Neel “Infinite Cash”kari, who couldn’t be bothered to worry about inflation while pinning rates at zero and sending the Fed’s balance sheet vertical for years under a prior administration).

The long end was not happy with the decision (or Warsh’s relatively obscure comments at the press conference), as the 30-year Treasury ripped back to new highs from 2007 and the 10-year broke the 4.75% level for a ~2 year high.

Incidentally, with rates moving higher and putting pressure on an already strained federal interest line item, Elizabeth Warren reiterated comments from last year that she’s finally found a point on which she and Donald Trump can agree: abolishing the debt ceiling.

Philips Curve enjoyers (an increasingly endangered species) got more data to back their inflation fears this week, as the latest US Manufacturing PMI came in at 53.8, down slightly M/M but still clearly in expansion territory and marking a full year with readings north of 50.

Meanwhile, GDP growth for Q2 came in at an optically soft 1.5%, but that headline was largely an artifact of higher net imports, as consumer spending rose more than 3% and business equipment spending ramped by over 15%.

That business investment lever continued to see more (questionably sustainable) momentum from its key driver this week, as AI accelerator giant Nvidia is reportedly in talks with OpenAI to backstop a $250 billion financing deal for a massive 10GW Ohio facility that would be the single largest data center ever built.

We’d note some meaningful nuances to this headline figure to put it into perspective, and we’d also flag that the financing for the power buildout is coming from Japan in exchange for lower tariff rates, with Commerce Secretary Howard Lutnick reportedly “involved in deciding who will get power,” elements that both seem to fall cleanly into the administration’s aggressive shift toward extracting more concessions from trading partners and ramping up industrial policy.

Of course, the market understandably is not so sure about all this backstop business, as Nvidia credit default swap spreads jumped to their highest levels on record (on an admittedly very, very short time horizon).

Our frenemies on the other side of the Pacific are not slowing down either, as Chinese memory giant CXMT went public and immediately ripped 5x on its first day of trading.

At the same time, The Information reported that China has started producing its own DUV (note: not EUV) machines at “high volume” (though it’s not entirely clear what that means), which spooked markets given that it suggests progress on lithography, a key Western advantage in the semiconductor supply chain. While we would never underrate the inventiveness of the Chinese, for perspective we’d note that this development represents roughly where ASML was in 2011.

It was also a busy week not just for hard AI infrastructure but also models themselves, as leading Chinese open source model Kimi K3 officially released its model weights to enable independent self-hosting.

Interestingly, though, Bloomberg reported that Kimi K3 was in fact trained on a cluster of 20,000 Nvidia H200s (which are technically subject to US export controls) acquired by Alibaba. If true, this is directionally confirmatory of the ongoing importance of US accelerators as a tool of geopolitical leverage, but it’s also worth noting that this would mean that the most popular open source model that both attackers and white hats are using to audit vulnerable code bases was effectively trained on accelerators two generations behind the frontier (we’ll let readers extrapolate from there).

In a similar vein, competitive open source model provider DeepSeek reportedly suspended its current fundraising round after its founder’s comments on the company’s continued reliance on Nvidia drew backlash from the Chinese government.

As the open vs closed model debate continues to gain steam, Nvidia, SpaceX, and Microsoft came together to launch an AI cybersecurity initiative focused on leveraging open source models. The group includes more than 200 of the largest technology and AI infrastructure players in the US, including OpenAI (but with one perhaps conspicuous absence).

In unrelated news, Anthropic CEO Dario Amodei published the company’s formal stance on the debate, noting that the company is not opposed to open models but also wants to see more serious export controls on frontier technology.

In any case, Meta CEO Mark Zuckerberg said all you doomers just aren’t bullish enough on AI and that the US should accelerate rather than restrict its pace of development.

South Korea took his advice to heart, announcing that it will inject $14 billion into the country’s sovereign wealth fund to support AI and data center investments, another data point on the long road toward merging the modern state’s fiscal power with the AI buildout (and it probably also doesn’t hurt as a support mechanism for the KOSPI, which is still licking its wounds from a 40% drawdown this month).

That same violent decline in many AI-linked stocks spelled the end for Leopold Aschenbrenner, the rising AI wunderkind who saw his Situational Awareness fund (which, in hindsight, was evidently not aware of some relevant situations) swell to $45 billion in AUM before getting liquidated on levered AI bets this week; as ever, Kenny G was there to pick through the wreckage.

On the physical AI front (back in my day we just called them robots), the FCC imposed new import bans on Chinese robot models to protect the US’s buildout of its own robotics strategy, prompting China to threaten its own trade retaliation, which could include further restrictions on rare earth exports.

And speaking of robots, Nvidia (there’s that name again) struck a deal with Kawasaki Heavy Industries for a new joint venture focused on “next-generation digital shipyards” using robotics to better automate shipbuilding. This is likely both a sign of things to come (i.e. aggressive reindustrialization / “friend-shoring” will inevitably require automation to address skilled labor shortages) and a sign of the increasing entanglement between the US and Japan.

Regulatory Update

Following months of debate and revisions, a key Senate Democrat said she now feels optimistic about compromise changes to the CLARITY Act after “productive negotiations with law enforcement.”

BlackRock, Fidelity, Goldman Sachs, SoFi, and other institutions also publicly came out in support of the latest version of the bill this week.

Even more notably, Treasury Secretary Scott Bessent published a lengthy tweet pushing hard for the bill as well, noting it now has consensus from a variety of constituencies (and, for what it’s worth, emphasizing that it continues to delineate protections for developers of noncustodial software).

Down on his luck former trillionaire Elon Musk is reportedly planning to ramp up spending on midterm campaigns into November’s election season, which is worth watching given longstanding consensus that midterms will be a bloodbath for Republicans.

Noteworthy

The Bitcoin Policy Institute was named as a partner in the State Department’s new “Freedom Tech Excellence Program.”

Your opportunities to redeem yourself for that subpar grade in middle school geography continue to stack up this year, as geopolitical focus shifted from one coast of Saudi Arabia to the other this week on news that the Bab el-Mandeb Strait is now subject to an Iranian-linked Houthi blockade. This route had become a key alternative to the Strait of Hormuz and allowed the transit of millions of barrels of oil per day to flow out of the GCC countries, so its disruption unsurprisingly pushed oil prices back toward their springtime highs. As with every prior development in the Game of Great Power Chicken that has characterized most of the second Trump administration, this escalation ratchets up the key pressure points on both sides of the globe. The blockade will cut off a major source of oil export relief that was primarily serving Asian economies where oil-linked industrial demand destruction seemed to already be well underway (though the Houthis may allow Chinese-owned tankers to pass undisturbed) and will put yet more upward / downward pressure on Western sovereign debt yields / US equity markets (though it remains to be seen how many additional rabbits the Treasury-Fed complex may be able to pull out of its hat, as Treasury volatility still hasn’t gotten too squirrely). In the limit, dollars can be printed more easily than oil, and we think the developments of the past year generally show the world’s “middle powers” moving closer to rather than further away from the dollar system, potentially giving the US more capacity to effectively socialize the impact of the measures needed to keep its fiat flywheel spinning – but that said, those same measures also continue to make the case for owning a little (or perhaps a lot of) outside money.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

Coinkite opened up early access reservations for Arca, its new physical digital safe for storing critical personal data:

Media

Giga Energy published a blog post on the company’s GigaPod, a pre-built module engineered for rapid HPC data center deployments.

Strike Founder and CEO Jack Mallers published an essay on dealing with and learning from bear markets.

Market Updates

After some fun melt-up activity for your favorite stonks, the wrong kinds of vertical charts are officially back on the menu, as ongoing re-escalation of conflicts around the Middle East drove oil benchmarks north of $90/barrel on the week, with Brent briefly pushing past $100 again for the first time in several months.

In particular, the war metastasized into what looks like a new and unfortunately more kinetic phase this week, with the Iran-linked Houthis initiating a blockade of Saudi Arabian ships at the Bab el-Mandeb Strait, the Red Sea gateway that has for several months served as the main release valve for crude oil shipments looking to avoid the Strait of Hormuz – most of which, notably, were bound for Asia.

As with the initial chaos at Hormuz earlier this year, this new disruption quickly drove major frictions in the maritime insurance market, including bellwether carrier Lloyd’s of London restricting war coverage for Saudi vessels and introducing a new condition voiding the policies of any tankers that agree to pay tolls to Iran during the conflict.

The energy spike and renewed uncertainty pushed US Treasury yields back to highs not seen in more than a year, with the 10-year breaking the 4.7% level for the first time since early 2025.

For what it’s worth, the closely-watched MOVE Index – which measures Treasury volatility, a KPI we’ve speculated may be at the top of Treasury Secretary Bessent’s Bloomberg Launchpad – remained fairly subdued all week despite the pop in yields, closing the week below its level from just a few weeks ago even with Secretary of State Marco Rubio indicating the US is now taking a “head for an eye” approach to Iran and President Trump suggesting the US is considering a new “massive attack” on Iranian infrastructure.

Meanwhile, the US approved a landmark nuclear deal with Saudi Arabia that will pave the way for a civilian nuclear program (with a little help from some American contractors, of course), the latest data point suggesting the Kingdom is moving closer toward the US’s orbit amid an increasingly bifurcated global order.

And speaking of our old friend the Global Economic Reordering, the White House brought the dreaded T-word back to the headlines this week with a round of broad tariffs on 60 trade partners (though these duties a) will largely just replace an older set of charges that expired Friday morning and b) were immediately challenged by a new lawsuit).

The President also threatened a separate new round of tariffs on the EU for “robbing” American tech companies with onerous fines and regulations.

More significantly on the trade front, Treasury Secretary Scott Bessent suggested the US will consider sanctions on China if the US finds that the Chinese have committed “IP theft” of American frontier AI models via distillation or other means.

Right on schedule, Michael Kratsios (Director of the Office of Science and Technology Policy) said just a couple days later that the US has indeed gathered evidence that Moonshot AI’s new Kimi K3 model used distillation techniques while also routing around US export controls to access more advanced Nvidia chips for training.

Undersecretary of State Jacob Helberg quickly chimed in with some fighting words, clearly setting the narrative frame for upcoming action by the administration. In response, China is reportedly considering its own round of export controls of its latest models.

At the same time, several key AI players from OpenAI to Anthropic have ramped up calls for greater controls on Chinese open source models due to the cybersecurity and terrorism threats they could enable (in other news, the candlemakers’ union recently rang the alarm bell over the sun’s harmful UV rays).

One example of such ostensible dangers came in the form of an OpenAI model apparently going rogue and staging an attack on the systems of model library Hugging Face, though ironically this attack was itself thwarted by the use of an open source Chinese model.

Nevertheless, the incident – the timing of which is totally not suspicious as the frontier labs ram up their push for a regulatory moat more responsible government oversight – prompted the introduction of an “AI kill switch” bill in Congress late this week, which would give the Department of Homeland Security new abilities to unilaterally throttle or shut down models deemed to threaten national security.

Notably, there appears to be some (likely deliberate) conflation of open source model use and Chinese models specifically, as Secretary Bessent clarified that the administration has no issue with open source itself, but rather what it sees as a foreign rival stealing critical American IP.

Some interesting fault lines on this issue also appear to be emerging within private industry, as Nvidia CEO Jensen Huang created a Twitter account specifically to address his company’s support for a thriving open source model ecosystem. (As an aside, AI capex bears who have repeatedly called a top on every open source model release may want to consider the implications of the world’s biggest AI capex beneficiary vocally supporting open models while building his own).

Hyperscalers including Microsoft and Meta also warned the administration against “premature restrictions” on open source broadly.

However the open vs closed debate evolves, the White House continued to take steps centering the AI buildout as a key strategic priority, with the administration’s Office of Science and Technology Policy announcing it plans to redirect hundreds of billions of dollars away from legacy research institutions and toward new types of science funding, including for AI acceleration.

Meanwhile, FERC – the federal agency overseeing the US electric grid – held a harsh hearing with officials from PJM, the nation’s largest regional grid operator which manages power for most of the mid-Atlantic. Frustrated by the operator’s sluggishness in managing its massive AI data center interconnection queue, FERC suggested PJM has until September to improve approval speed or risk facing significant penalties including a potential break-up.

Overseas, Japan’s Finance Minister said this week that she wants to encourage Japanese households and pension funds to “invest more in domestic assets.” On the margin, one of the world’s largest net creditors and perhaps the key sovereign holder of US Treasuries repatriating savings obviously has some potentially negative implications for a variety of asset classes, though steadily rising European sovereign yields may suggest there’s another first target on the chopping block.

JPMorgan CEO Jamie Dimon reiterated his recent cautious stance on Treasuries this week, noting he would not own either US sovereign debt or stocks at these levels, while Goldman Sachs noted that T-bill issuance will reach more than $820 billion this year off of just $360 billion in 2025.

Our guess is that Dimon may also remain bearish on alternatives like private equity, as assets stuck in “zombie funds” (i.e. vehicles that have surpassed the typical 10-year life of such private funds) reached another all-time high of $350 billion, with another $500 billion+ now sitting in funds older than 7 years.

Elsewhere in all-time highs, the percentage of bitcoin held by “long-term holders” (i.e. UTXOs that have not moved in ~6 months) reached an all-time high of 84%, the kind of activity generally seen near bear market bottoms.

Regulatory Update

As part of the protracted fight over the CLARITY Act, President Trump agreed this week to new ethics language in the bill that would prevent elected officials (e.g. a certain Orange Man) from benefiting from token launches and similar crypto deals while in office.

This briefly boosted hopes for the legislation’s near-term passage, but Democrats rejected the proposed edits, and Senate Majority Leader John Thune indicated he doubts the bill will move forward before the August recess (which likely means it won’t pass until 2027 at earliest given upcoming focus on midterms).

Noteworthy

Amid an increasingly constrained and chaotic global energy environment, the Wall Street Journal ran a feature this week on US oil producers who have so much natural gas that they can’t even give it away.

Strike Founder and CEO Jack Mallers announced he would step down from his role at Twenty One Capital and that Strike will remain an independent company.

Nine companies including BlackRock, Fidelity, and Coinbase announced the formation of the Bitcoin Security Consortium, which will dedicate $15 million over the next three years for grants to developers researching post-quantum bitcoin security.

Block launched Buzz, a new Slack-like agentic collaboration tool built on Nostr.

BitMEX, one of the oldest crypto exchanges, announced it will wind down later this year.

How you liking those summer doldrums, anon? The Great Power Race skidded into its next lap with a clear re-escalation of the conflict in Iran (can we just go ahead and call it a war now?), driving a cascade of impacts across critical supply chains. At the risk of beating a dead horse, we’ll highlight again that many of the results of this resurgent disruption will probably relatively favor the US over both China and Europe (the latter of which may be, from the White House’s perspective, strategically important to bring the junior partner in this project we loosely call “the West” fully onside). That said, we might actually argue that the more meaningful data point for the global chess board this week came not from Tehran but rather Beijing, as China’s Moonshot AI ignited another round of hand-wringing in a niche but increasingly influential corner of the internet with the release of Kimi K3, its latest open source model. K3 is the first Chinese open source model to score comparably to leading American frontier models on a variety of benchmarks at a much lower nominal sticker price, despite not benefiting from access to superior American chips used to train the most cutting edge models to date (though virtually everything about this sentence comes with massive caveats, including questions on benchmark-maxxing, relative model size, distillation / IP theft, the internal progress that frontier companies have allegedly made but not actually released publicly, and actual cost per task inferiority in real-world use).

We’ll have to see whether this is just another DeepSeek moment (you may recall, but probably not, that GLM 5.2 was supposed to be the model that would kill the frontier labs roughly 4 weeks ago), but either way we think this highlights an important dynamic that is likely to animate much market action across asset classes over the next several years. The most straightforward readthrough would be that this kind of aggressive fast-following by a geopolitical rival in one of the few domains where the US has had a clear advantage up till now is likely to catalyze even more urgency on the part of key American companies and the White House to do everything possible to further entrench American dominance at the frontier, which likely means both more “anti-espionage” measures (Exhibit A: this week’s China-focused revival of 2020 election audits) and, of course, more spending. But the second-order question many inventors are rightly asking here is whether the recent capex pace we’ve seen can reasonably be sustained if the inevitable free-rider problem of open source models durably crimps the expected ROIC of aggressive investment in training next-generation models. Game it out, though: if it’s no longer economical for private companies – even the biggest in the world – to build new frontier models, but scaling laws are still holding, the world’s most powerful government has made that investment push the key bulwark for what it sees as an existential reindustrialization agenda, and no defense department in the world feels comfortable waiting around to see if the other guy gets to the next frontier generation first, then who picks up the tab? The likely answer to that question – in conjunction with an unfunded global sovereign liabilities bill well north of $100 trillion – has many downstream implications, but we continue to think one of them is that it may make sense to own portable, apolitical scarce assets just in case they catch on.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

AnchorWatch launched multi-institution custody support, allowing customers to leverage the company’s uniquely powerful Trident Vault technology and optional 1:1 insurance coverage without holding private keys directly:

Fold launched the first bitcoin gift card for TikTok users:

Media

Ten31 Managing Partner Marty Bent appeared on the Bitcoin News show to discuss how he sees bitcoin’s near-term setup.

Market Updates

The Strait of Hormuz was thrown back into its ongoing quantum superposition this week, as Iran told the world it has once again closed the waterway even as a key international maritime group indicated traffic was continuing to flow early in the week.

But the wave function collapsed mid-week as Iran expanded its attacks on targets around the Persian Gulf and the US responded in kind with its own strikes, sending tanker volumes to three-week lows.

In response, President Trump assured the world that the US is prepared to take up the mantle of “guardian of the Strait” for a meager 20% fee (hey, we’re not running a charity here, ok?).

The President walked back the idea of a protection fee shortly thereafter (around the same time as various ships apparently said “nah, we’re good”), but in any case the eruption of new dangers in this maritime chokepoint has clearly increased Middle Eastern urgency to build out alternative export paths to bypass Hormuz entirely (some tinfoil hat enthusiasts might say this is not an entirely unintended outcome).

More specifically, Iraq’s Prime Minister made the trek to Washington this week to sign several MOUs aimed at bringing various US companies into the country to boost oil & gas production, as well as to accelerate work on an Iraq-Syria pipeline that would offer a new non-Hormuz alternative through a partnership with Chevron.

Zooming out, Goldman Sachs estimated that ongoing pipeline projects across the Gulf will be able to facilitate ~45% of pre-war volumes by the end of next year and 60% by 2028, alongside longer-term term plans from Saudi Arabia and others to expand capacity well beyond that.

To be fair, these projects by themselves won’t solve the issue of Iran using targeted strikes and drone attacks to disrupt refineries and terminals in the area, not to mention potential attacks by the Iran-linked Houthis in the Red Sea.

But while the world waits on new pipeline infrastructure to come online, oil prices are moving higher once again, with both WTI and Brent breaking well into the $80+ per barrel range, while diesel surged 20% in just a week.

Even more notably, benchmark European natural gas prices have jumped aggressively, with winter futures contracts now closing in on highs from the spring, contributing to some terrible, horrible, no good, very bad price action across the European sovereign debt complex.

But as we’ve discussed in prior newsletters, the reality is that it’s a relative game, and Nikkei ran a noteworthy piece to that effect this week highlighting that this year’s disruptions have made the US a clear emerging winner on helium exports – a key input to many critical industries, most notably semiconductor manufacturing.

Domestically, the market at least got some positive (if admittedly backward-looking) news this week, as June’s CPI data came in well below expectations, marking the largest monthly decline since spring 2020’s COVID crash as both energy and core inputs came in soft. The PPI also posted an unexpected M/M decline.

A cynic might posit that the headlines out of Iran over the last two weeks suggest this is a local bottom and we’re gearing up for the next move higher, but new Fed Chair Kevin Warsh told Congress this week that the inflation of the last five years will be a thing of the past thanks to better monetary policy and the disinflationary impacts of the AI boom (NB: your latest implicit confirmation that making the AI trade work is the lynchpin for a number of other policy objectives).

Several of Warsh’s colleagues pointed in a similar direction, with Fed Governor Christopher Waller suggesting that rate hikes from here are still possible but that the Fed “shouldn’t fight the last war” by focusing excessively on inflation. New York Fed President John Williams similarly suggested that inflation has peaked and benchmark rates are now well positioned.

They’d better hope that’s the case, as the US’s reported fiscal deficit through nine months of this fiscal year came in slightly higher than the same period last year, with most analysts projecting the US will surpass $2 trillion again on the year (though deficit hawks can perhaps take some small consolation that the Y/Y growth in the deficit has roughly flatlined in the past couple years, even as GDP growth hasn’t yet done enough work to get the deficit down much as a percentage of GDP).

For now, though, Warsh and co may have some breathing room, as Treasuries caught a small bid on the week while bond volatility once again remained pretty subdued despite the clear negative turn in the headlines.

Treasury Secretary Scott Bessent publicly confirmed this week that all the gold held in Fort Knox is still present and accounted for (I mean, what else was he going to say?), which could also offer another rabbit for the US to pull out of its hat if push comes to shove via gold revaluation.

Warsh and Bessent’s AI buildout hopes arguably got some additional positive signals as earnings season kicked into gear this week, with IBM warning investors that its Q2 print will be below guidance given the magnitude of customer spend shifting toward data center capex and AI budgets.

At the same time, industry bellwethers and near-monopolies ASML and TSMC both put up blowout prints, with TSMC increasing its capex guide off an already eye-watering figure. But despite the newsflow, semis and most AI-derivative trades got absolutely trucked on the week, giving everyone their latest reminder of what happens even to great stocks when multiples creep up to 60x+ earnings and everyone convinces themselves it’s cheap on 2030 numbers (pour one our for your local bottleneck bro).

An announcement from Chinese lab Moonshot AI also poured fuel on the fire, as the company unveiled the next generation of their open source Kimi model, which seems to come close to US frontier models on many benchmarks. This immediately triggered all the typical arguments about benchmark-maxxing and token efficiency, and we do think there’s strong reason to be skeptical about the actual impact on the broader AI complex here, but again, it doesn’t take much to ignite a violent selloff after the vertical market performance we’ve seen over the past couple months.

Meanwhile, a new report that Google’s upcoming Gemini 3.5 Pro model has been delayed due to poor performance further dented sentiment, though interestingly the delay seems to be due at least partially to engineers not having sufficient compute capacity to make improvements given internal compute constraints (not exactly a signal of excess supply).

But whatever the excuse / reason, that update won’t help ease nerves in the hyperscaler bond market, which the Wall Street Journal reported is seeing more queasiness from investors in new rounds given the quantity and pace of issuance.

Mag-7 bondholders may perversely get some relief from fears about the capex binge near term as regulatory momentum against the data center buildout is clearly picking up steam, with New York (who would have guessed?) becoming the first state to impose a moratorium on new data center buildouts while well-organized (and totally not astroturfed) activist groups continue to ramp up protests against AI generally.

Amid all these headlines, you could be forgiven for forgetting about bitcoin, and many of its recent buyers certainly have, as the ETF complex set a new outflows record in June. That said, against the aggressive selling, bitcoin’s price has remained largely rangebound, all while historically useful bottom indicators continue to stack up.

Regulatory Update

The American Reserve Modernization Act – the latest strategic bitcoin reserve bill with more than a dozen sponsors – advanced to a hearing by the Financial Services Committee, making it the first SBR legislation to reach the committee stage.

President Trump met with a group of Senators to urge passage of the long-delayed CLARITY Act, though time is running out to get the bill across the finish line before the August recess, in which case the likelihood of passage this year would drop substantially.

Overseas, Japan and South Korea both made updates to their regulatory treatment of bitcoin and digital assets to bring them closer to each country’s traditional financial system.

Noteworthy

The IEA published its latest global critical minerals outlook, which unsurprisingly highlights China’s continued dominance in refined production of most key rare earth minerals.

You just knew it was too good to be true. The next season of everyone’s least favorite will they / won’t they drama was greenlit by the studio this week, as the US and Iran put aside their tenuous (and apparently poorly worded) “Memorandum of Understanding” to return to trading strikes around the Persian Gulf. As usual, this latest round of slap fighting was accompanied by declarations from both sides that their counterparty is unreliable scum who can never be trusted (but also talks are ongoing). Notably, though, this recent escalation has (for now) not done much to oil prices, as key benchmarks fell back near pre-war levels after a quick spike up earlier in the week, and even more significantly, bond volatility has generally been subdued even with US Treasury yields heading back toward YTD highs. As prominent liquidity observer Michael Howell has noted, managing the Treasury market’s volatility may be even more important in the near-term than managing exactly where yields shake out (though as we’ve argued elsewhere, that will eventually matter too), but in any case the action this week shows a market that does not believe that network execs will keep this new season on the airwaves for very long, or at least that its impacts on the US’s strategic position are getting closer to a point of diminishing returns. It’s too early to call here, but if that intuition proves correct (i.e. if the bond market can avoid reflexively puking longer than IRGC hardliners can hold out), analysts should bear in mind the implications that would have for the administration’s pursuit of its broader policy agenda in the near term.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

Giga Energy announced GigaBase, a comprehensive, scalable system for AI data center development:

Strike launched volatility-proof loans, a unique product offering protection against loan liquidation from bitcoin price volatility:

Media

Upstream Data Founder and CEO Steve Barbour discussed his pioneering work in deploying bitcoin mining in the oilfield.

Market Updates

After roughly a month of relief from a news cycle dominated by a narrow strip of water most Americans had never heard of at the start of the year, the US and Iran put their “Memorandum of Understanding” on ice this week as Iran attacked several ships making passage through the Strait of Hormuz.

The US immediately withdrew its recent waiver allowing the country to sell oil without sanctions and resumed strikes on various Iranian targets.

Alongside some choice words for his counterparty, President Trump declared the ceasefire (peacefire?) dead as he no longer wants to deal with all this (you and me both, pal), briefly sending oil up ~6% midweek.

The timeline for a durable resolution here once again remains elusive and is complicated by ongoing reports (which used to be confined to tinfoil hats on Twitter but have since breached containment to outlets like the New York Times) that leadership in Iran remains deeply divided, with a hardline IRGC faction aggressively opposing any deal with the US.

That said, both WTI and Brent retreated close to prewar levels over the course of the week, even as the White House ramped up threats of a renewed blockade on Friday, suggesting investors aren’t yet buying that this is a Spring 2026 Redux.

Importantly, though, Qatar said it would pause its efforts to restart production at Ras Laffan, the world’s largest LNG facility, in response to the renewed disruptions, and unlike oil, European natural gas benchmark prices are trending back toward highs from the spring, which definitely bears monitoring as we inch closer to winter.

Various sources reported that Saudi Arabia is pursuing plans to expand the capacity of its East-West pipeline – a key alternative export option that bypasses the Strait entirely – by 2 million barrels per day (vs ~7 million today), though such an expansion would take several years.

Alongside the pop in energy prices, US Treasury yields also rose toward historically uncomfortable levels again on the headlines, but on notably low volatility, as the MOVE Index barely, uh, moved all week.

Japanese government bonds were not quite as tranquil, with yields continuing to break out to new 30-year highs.

Meanwhile, Treasury’s War has continued apace, as Iraq agreed to US demands to cut off dollar flows to Iranian-linked militias in exchange for a resumption of billions in dollar shipments to Baghdad that have been cut off since the start of the war.*

On the same front, the New York Times ran an editorial acknowledging the overall posture shift from Scott Bessent’s Treasury, citing his keynote speech at the Economic Club of New York that we flagged last month while noting that “the days of America being played are over.” Agree or disagree, it’s no doubt a noteworthy vibe shift to see the Gray Lady featuring a piece like this, and an interesting sign of some ideological pump-priming that may be taking place behind the scenes at the country’s foremost opinion-making institutions.

But lest you think that the Trump administration has gotten too distracted by the conflagration in the Middle East, the President renewed his calls for the US to acquire Greenland at a NATO Summit this week.

AI continued to grab its share of headlines this week, as SK Hynix – one of three members of the global DRAM mafia oligopoly, which was already publicly traded in Korea – officially went public in the US, immediately popping 13% and pushing the company into trillion-dollar market cap territory.

SK’s introduction to US capital markets should put them in a strong position to play nicely with Commerce Secretary Howard Lutnick, who is reportedly pressing both SK and Samsung to move more memory manufacturing to the US.

On the lab front, OpenAI rolled out its new class of GPT 5.6 models that were delayed for several weeks by government oversight, and as per protocol with frontier model releases, they immediately became the hot new kid on the block that’s going to take all the jerbs.

That said, the company is reportedly pushing back its plans for an IPO to next year on valuation concerns (no low ballers, Sam knows what he’s got).

One week after joining a special advisory board at the Department of War, prominent venture capitalist and AI evangelist Marc Andreessen was appointed to a new Federal Reserve advisory group to evaluate the economic impacts of AI.

The folks in the Eccles Building may first need to figure out which direction they’re rowing on more basic matters, as the latest Fed minutes unsurprisingly point to ongoing division on the right path for benchmark rates from here (though there appears to be solid consensus on new Fed Chair Kevin Warsh’s goal of reducing reliance on “forward guidance”).

As the Fed waffles on rates, existing home sales in the US continue to languish near decade lows, with the latest numbers for June showing a 2% decline M/M.

After selling a token amount of bitcoin last month for the first time since 2022, leading bitcoin treasury company Strategy sold a more meaningful chunk of 3,588 bitcoin this week to fund dividend payments on its preferred shares.

Circle, the largest US-based stablecoin issuer, received its final OCC approval to establish a national trust bank (despite ongoing protests from the banking industry of these licenses being granted to such upstarts), the latest move bringing digital assets players closer to traditional monetary plumbing.

*Evergreen tweet for everything about this headline.

Regulatory Update

Bloomberg reported that various officials and agencies in the Trump administration – specifically those in the Treasury and Commerce Departments – are in the process of wrangling over who has legal authority to control the strategic bitcoin reserve (which could be read as bullish or bearish depending on your inclination).

But whoever ultimately gets the keys to the orange Ferrari, the President reiterated at a press conference this week that he’s a “big crypto guy” while indicating that bitcoin might become eligible for his recently launched Trump Accounts.

On the flipside, in a decision that seemed to amount to “because volatility,” New Hampshire’s Executive Council voted not to advance a $100 million bitcoin-backed bond that seemed to have a good deal of momentum coming into this year.

Overseas, the EU continued to march steadily toward its apparently preordained Orwellian end state with the passage of the first leg of its mostly unpopular “Chat Control” framework to enable mass warrantless surveillance of digital communications.

Noteworthy

River published an updated article on the US as the world’s “bitcoin superpower,” outlining various metrics by which the US is in clear position to disproportionately benefit from growth in bitcoin adoption.

Polymarket added instant bitcoin deposit functionality over the lightning network.

A new study out this week (published, interestingly, by Chinese researchers) suggested that the Chinese rare earth minerals industry, a sector the country currently dominates and which has become a flashpoint in rising tensions between China and the US, effectively relies on patents controlled by the US and Japan (though it’s unclear how much this really matters given the questionable international enforceability of IP law).

They say that when one door closes, another opens, and professional Situation Monitors everywhere rejoiced that the lull in the Iran conflict gave way to plenty of AI fodder this week. For our purposes, perhaps the most noteworthy headlines on this front were OpenAI reportedly offering the federal government a 5% stake in the company while FERC issued a series of show-cause orders pushing the US’s grid regulators to accelerate new data center approvals. If it wasn’t already obvious after a year of the White House sidling up to lynchpins of the AI arms race and the semiconductor / power industries that support it, it should be pretty clear now that this is among the key vectors through which the Trump administration intends to “run it hot” to stimulate a resurgence of domestic industry and American advantage over would-be challengers (cough China). We can no doubt debate whether limiting access to frontier intelligence is the right path to actually achieving those goals long-term (to say nothing of the free speech implications thereof), and perhaps it’s true that open source models will soon render this advantage meaningless as “good enough” fast-followers draft off lab progress to commoditize the frontier (though we think there are strong arguments that that’s far from a foregone conclusion).

In any case, though, the plan seems to have been laid out in increasingly explicit detail, which will have broad implications for overall fiscal policy and favored industries from here, probably regardless of what happens in November. (As an aside, memory bros may also want to ask themselves what happens when their favored bottleneck input becomes the tall poppy blocker to pushing this agenda forward). Longtime readers may recall that this is fundamentally a bitcoin-focused newsletter, but we’d argue that all these themes – China, Iran, manufacturing, rare earths, industrial policy, frontier models, all of it – are ultimately deeply relevant to bitcoin’s future, as all these epochal shifts will not only necessitate certain “creative” actions from a dominant but historically-indebted superpower facing a titanic demographic cliff over the next decade, but also insofar as they signify key pillars in the shift to an emergent new dollar system that may strongly favor assets like bitcoin (which, incidentally, the President of the United States owns in size your humble author can scarcely imagine).

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

Strike secured its MiCA license, allowing the company to offer its full suite of products across all 27 EU member states under a single, permanent regulatory framework:

While officially launching in Spain and Italy:

Maple AI launched its native app on Windows, making the product available on all major platforms:

Coinkite announced major new firmware updates for its flagship products:

Market Updates

Recently minted Iran analysts updated their resumes to reflect their newfound expertise in AI this week, starting with a Monday morning announcement from South Korea’s government that Samsung and SK Hynix – two-thirds of the memory oligopoly currently printing unprecedented margins on the AI wave – have agreed to a half-trillion dollar capex plan for new fab capacity buildouts over the next decade.

That timeline may not be quick enough for scrappy little startups like the Apple Computer Company, which is now seeking White House approval to source alternative memory supply from CXMT, a Chinese supplier officially blacklisted by the Department of War.

While it won’t help the memory tightness, President Trump announced that leading logic chip producer TSMC will double the size of its planned investment in its Arizona facility – which was already slated at $100 billion – while claiming that the US’s share of global semiconductor manufacturing will rise to 50% by the time he leaves office (which we read as an implicit confirmation that the President will be seeking several more terms).

At the same time, the Federal Energy Regulatory Commission (FERC) issued show-cause orders to all six FERC-regulated regional grid systems regarding their speed of new interconnect approvals for large loads (i.e. hyperscalers and neoclouds). The orders are explicitly intended to speed up regulatory approvals for new data center proposals, the latest sign of the strategic importance the current administration ascribes to the AI buildout.

And on that note, the saga of OpenAI’s relationship to the White House – which has been advancing from “u up?” texts to something more serious since CFO Sarah Friar’s trial balloon comment about a federal backstop last year – continued escalating, with the company reportedly proposing that the government take a 5% stake, which would be worth over $40 billion at the frontier lab’s most recent private valuation.

While CEO Sam Altman has reportedly pitched this as a way to “share AI upside with the public,” if you squint hard, it might look a little like imperial tribute to keep the Praetorian Guard off the company’s back. In any case, Caesar Aurantius appears to have been satisfied for now with steps taken by rival frontier lab Anthropic, as the company was allowed to re-release its previously restricted Fable 5 model back into the wild on Wednesday (though tokenmaxxers quickly complained that this version appears to have been nerfed vs the original release).

Cleveland Fed President Beth Hammack threw cold water on everyone’s good time, lamenting that all this AI funny business is driving a resurgence of inflation, which could potentially force the Fed to hike benchmark interest rates soon.

But after similarly talking tough on inflation over the past couple months, new Fed Chair Kevin Warsh suggested this week that forward inflation expectations have actually come down over the past month, potentially giving the central bank more breathing room on rate hikes (wait, I thought we weren’t doing forward guidance anymore?).

Meanwhile, the surprisingly weak latest jobs report (which included a solid downward revision to last month’s numbers) probably won’t create much incremental appetite for hikes at the next meeting.

For what it’s worth, a new paper from payroll and ops giant Ramp suggested that AI appears to be correlated with increased hiring at companies that are aggressively adopting it, even when controlling for some obvious confounds (e.g. higher-adopting companies are already likely to be faster-growing, etc).

But whatever your level of bullishness on AI or bearishness on its inflation and employment impact, Meta CEO Mark Zuckerberg did his part to briefly drive some mean reversion for both sides, as new reports suggested Meta might be pivoting to selling some of its compute capacity to third parties rather than consuming it internally. Later reports also indicated that Zuck has told employees that the company’s progress with agentic AI has been slower than expected.

Basically everything related to AI absolutely nuked on these headlines, with semiconductor ETFs down 10%+ on Thursday, and more exotic bets dropping even harder. As always, the market seems to have gotten meaningfully ahead of itself on its interpretation of both of these developments, as a later report from SemiAnalysis and tweet storm for Meta AI Chief Alexander Wang suggested basically the opposite of investors’ kneejerk interpretations, but them’s the breaks of making 30% in a day on the latest loss-making Sri Lankan “AI bottleneck” endorsed by your favorite anonymous anime avatar.

But never fear, the AI buildout is likely still here, as the Department of War just appointed leading venture capitalist Marc Andreessen to its newly reorganized Defense Policy Board.

Yet another “Democratic Socialist” won a Congressional primary this week just in time to ring in America’s 250th birthday. You could try showing this voting bloc recent data from Bank of America indicating that recent payroll gains have disproportionately benefited the lower-income cohort, but we suspect that an honest desire to empower the oppressed proletariat may not be the key force driving this recent trend.

US money supply seems to be inflecting right alongside growing class struggle politics (funny how that works), with M2 hitting another new all-time high in June on 5.6% Y/Y growth, good for the fastest pace since July 2022.

At the same time, the USDJPY cross – a key FX rate influencing a wide variety of positioning worldwide – hit a new 40+ year low of nearly 163 before a sudden reversion that may or may not have been the BOJ’s latest intervention.

Now that you’ve cleared your palette on all that content totally unrelated to Iran, we regret to inform you that there was still at least one noteworthy pair of headlines out of the Gulf this week, as Saudi Arabian oil exports have now ramped up to 90% of their prewar levels.

In a pretty striking dichotomy, though, Iran is reportedly struggling to find buyers for its 58 million barrel backlog of unsold crude products, with 90% of its backlogged exports still sitting on the water with no clear destination. Reports indicate that Chinese independent refiners – the key end market for Iranian oil before the war – appear reluctant to resume aggressive purchases for now despite temporary US sanctions relief.

Back in the Western Hemisphere, after months of hints to this effect, the US officially said it will not renew the USMCA trade agreement with Mexico and Canada, potentially setting up a tough negotiating backdrop for the US’s neighbors.

While the US scores wins on AI and international leverage, the domestic private credit backdrop has continued to look shaky, with sector poster child Blue Owl reporting investor withdrawal requests from two of its key funds at 19% and 38%. These figures, while striking, are actually down slightly Q/Q, though it’s unclear if we’ve seen a global or just a local top.

Elsewhere in the market’s favorite exotic credit punching bags, leading bitcoin treasury company Strategy established a new “Digital Credit Capital Framework” intended to stabilize its preferred stock complex with stronger cash buffers and more programmatic guidance on issuance and buybacks of its various tranches. The move led to a 21% rebound in STRC on the week (screenwriters getting a little heavy-handed here), though MSTR common stock briefly touched below 1x NAV.

Other corporate digital assets names also had a big week, with BlackRock, Visa, Mastercard, Coinbase, Stripe, and nearly 140 other companies announcing the launch of OpenUSD, a new stablecoin that the players will look to integrate into their core products and which will share rewards from reserves with users.

Time will tell how well this rollout proceeds, but we’d note that an early look at the basic specs suggest it’s the latest validation of exactly the technical direction of travel we outlined earlier this year (TLDR: it is not bullish for “blockchain technology”).

Bitcoin finally gave the “58k Gang” (hey guys, a message for you) the moment they’ve been waiting for, as the orange coin dipped to the $58,000 level for a couple days before rebounding above $60,000 again later in the week.

We won’t try to embark on the fool’s errand of calling a bottom, but we’d just note that bitcoin held in long-term hold addresses just hit another all-time high, a typical precondition for prior bear market bottoms, and various other on-chain metrics point in a similar direction.

Regulatory Update

As part of his annual asset mix disclosure, President Trump reported owning more than $50 million in bitcoin in self-custody (though this was for year-end 2025, so we’ll have to wait and see if he was able to maintain diamond hands through this year’s volatility).

The President also suggested that bitcoin and other digital assets should not face the same capital gains tax regime as equities or other investments (a view that may be particularly close to his heart following his reported ~$1 billion in crypto gains last year).

Noteworthy

The Bitcoin Policy Institute published a detailed report highlighting the financial influence of the CCP and China-adjacent actors on various media campaigns opposing the US’s data center buildout.

IBM unveiled a new chip spec that doubles the transistor density of their prior design from 2021, keeping Moore’s Law directionally alive (even though its status as the first “sub-1 nanometer” commercial design is a bit of a marketing maneuver more than a literal physical description).

The Wall Street Journal ran a feature on JP Morgan ramping up its investments and involvement in American defense spending, with deals and financing worth $1.5 trillion through 2035.

It wouldn’t be the US-Iran conflict we’ve all come to know so well if there weren’t (at least) one final fake-out, and Timestamp readers got a real-time look at the latest in a long line of these rugpulls last week when Iran briefly “closed” the Strait of Hormuz once again just ~20 minutes after our newsletter highlighting the peace deal went out. Nevertheless, the spice has continued to flow out of the Persian Gulf this week, with tens of millions of barrels of oil exiting the waterway and prices plummeting to prewar levels, though we’ll have to see how well that holds given the late-week slap-fighting between the two sides (there’s an old saying in Tennessee…). In any case, the progression of the conflict has given way to some pretty explicit acknowledgments by key officials like Treasury Secretary Scott Bessent that this and other recent military actions have been animated by a focused US effort to reassert dollar dominance and to practice “economic statecraft” whereby the US leverages its latent, under-utilized advantages to regain control of critical supply chains and shore up domestic industry. Bessent gave a lengthy, detailed speech this week to that effect which underscores many of the themes we’ve been noting over the past year, and we expect that this stance will continue to color the administration’s actions (and forward-looking investors’ allocation decisions) over the next several years.

But attention spans are limited, the Iran war has jumped the shark, and market focus has moved definitively to all things AI, especially the impact of the unprecedented memory shortage – which is now driving legitimately painful inflation in consumer electronics, something most people under 40 thought was basically impossible – and increasingly aggressive federal controls on the deployment of the latest AI modes (which, while dystopian and discouraging, probably shouldn’t be too surprising if you follow the logic of Bessent’s thinking). Lines are now being drawn around who can access frontier intelligence, when they can do so, and under what terms; we could make many arguments as to the real key motivations behind this, but in any case it appears to be a trend that is just starting its upward inflection. Perhaps open source models can keep up, or at least provide “good enough” alternatives at substantially lower cost, but that probably depends on your view of how important recursive self-improvement is.

If successful investing essentially comes down to non-linear thinking and appreciation of hidden second-order effects (we’ll leave that up to the reader; it may just come down to vibes), then it may be worth reasoning through not just the implications of these shifts for your AI book (I hear some kind of glue is the next big bottleneck) but also for the broader economy over time. In a world where the US both needs to force a massive ramp of physical memory and power supply alongside 20 other critical industries while also titrating superintelligence to a select few, we would posit that you might want to hold scarce assets with asymmetrically positive correlation to the kind of spending that will be necessary to achieve those goals while supporting a permanent underclass general population that is permanently locked out of frontier intelligence. You’d probably get bonus points if that asset were free of counterparty seizure risk so that it couldn’t be arbitrarily Mythos’d, and it certainly wouldn’t hurt if the state itself also had a vested interest in seeing that asset increase in value over time. We hope readers will write in with any suggestions for what could fit that profile.

As the world’s largest investor focused on the convergence of bitcoin, energy, and AI, Ten31 has deployed over $200 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem. Visit ten31.xyz/invest to learn more and get in touch about participating.

Selected Portfolio News

Strike lowered its trading fees across user tiers, further cementing the platform as the best place to onboard to bitcoin worldwide:

Media

Strike Founder and CEO Jack Mallers delivered a keynote speech on bitcoin, AI, and the return of human creativity at this year’s Bitcoin Prague conference.

Ten31 Managing Partner Matt Odell joined The Bitcoin Podcast to discuss freedom tech’s path forward and the growing importance of open source software.

Market Updates

Right in line with the tenor of this whole situation, Iran briefly declared the all-important Strait of Hormuz “closed” once again over last weekend, a mere 48 hours after signing what was supposed to be a landmark (framework of a) deal to end the protracted conflict in the Persian Gulf.

But in a clear sign that the network has seen the latest ratings and won’t be renewing the show for another season, oil apparently continued flowing through the waterway all weekend and through this week regardless, with President Trump proclaiming that “19 million” barrels of oil exited the Strait on Monday alone.

US Department of Energy Secretary Chris Wright directionally echoed that claim and even went a step further, noting that the US has effectively ended Iran’s ability to threaten the Strait ever again (though we suspect this depends in practice on the pace at which GCC member states can sprint to build new pipelines and alternative access infrastructure).

But just for good measure, the Department of War went ahead and requested a little $88 billion top-up for ongoing war efforts in the Gulf.

The White House also suggested that Iran pinky swore that the channel will be entirely free of tolls or protection rackets insurance costs…though it looks like they may need a mulligan on that one, as Iran later launched an attack on a ship that failed to cross through the “approved” route, leading to a retaliatory move by the US on Friday evening.

However the soap opera unfolds come Monday morning, oil sent a clear message all week, with WTI extending its recent precipitous decline and finishing just under $70/barrel, or right at pre-war levels.

As part of the deal, the Treasury Department granted a temporary 60-day waiver of its sanctions on Iranian oil sales – provided those sales are conducted in US dollars – which opens up the potential for the first US imports of Iranian oil in decades.

After the issuance of this waiver, Treasury Secretary Bessent made several remarkably frank public appearances where he indicated that all of the US’s recent military operations have been focused on strengthening dollar dominance.

The DXY seemed to get the message, as the dollar strength index climbed to new post-Liberation Day highs, driven partially by the continuing fall of the USDJPY cross to new ~30 year lows.

Secretary Bessent also delivered a lengthy speech to the Economic Club of New York which laid out his vision for “American economic statecraft,” borrowing a term from forward-thinking strategist Michael Every and alluding to some of the themes we’ve been highlighting here for much of the past year.

And speaking of industrial policy, the Department of Energy announced a new program offering nearly $18 billion in conditional loans for utilities and energy companies to build and acquire components needed to strengthen the domestic nuclear supply chain.

The administration’s ongoing run it hot stance has continued to show up in US Manufacturing PMI data, where the latest readout rose sequentially and cleared consensus estimates once again, though a chunk of this was driven by inventory preloading as factory job cuts also surged. Meanwhile, the latest PCE reading posted its highest level in three years (though was in line with expectations).

While consumers may get some price relief at the pump for the semiquincentennial (you totally knew that word before this week, right?) if the Iran deal holds, they may have to make up for it in several other categories, as electronics are now driving meaningful inflationary impacts again for the first time in decades thanks to vertical increases in memory pricing.

In response, Apple pushed through nearly 20% Y/Y price hikes on its flagship Macbook and iPad models with more price increases on iPhones likely coming later this year, while Microsoft boosted prices of its Xbox line of consoles by a similar amount.

But hey, maybe next year you’ll be able to get an affordable Playstation again, as the release of Chinese open source AI model GLM 5.2 made waves this week as the model that will finally kill the hyperscaler capex binge and its insatiable appetite for memory once and for all (just kidding).

That said, you may have to pair your higher electronics bill with a longer than expected wait for the latest new AI models, as the White House is reportedly aggressively pressing Meta to submit its latest models for “voluntary” review ahead of any new releases.

Even more notably, leading frontier lab OpenAI agreed this week to a “staggered rollout” of its latest flagship model GPT 5.6 at the request of the Trump administration.

It’s not entirely clear which lucky enterprise clients will win the golden ticket for early access, or on what timeline the model will become available to those of us in the permanent underclass, but what is clear (and what gives us no particular joy to report) is that frontier intelligence has been classified as a matter of national security, with all the implications attendant to that designation.

Rival frontier lab Anthropic – whose own bleeding edge models Mythos and Fable were similarly restricted two weeks ago – seems to agree, at least based on a recently publicized letter sent to Congress earlier this month in which the company accused Chinese tech firm Alibaba of an extensive distillation scheme and warned that the US needs greater controls on access to the leading models to shore up its security posture.

That said, the administration is reportedly ready to allow a limited rollout of Mythos to a select group of federal agencies and companies (still no word on when Fable 5 might see the light of day for the masses).

Overseas, Latin America continued to drift notably right this week, as Colombian voters elected Trump-friendly political outsider Abelardo de la Espriella as the country’s next President, the latest in a string of recently elected Latin American leaders promising crackdowns on crime and greater alignment with the United States.

Back in the US, however, the opposite shift seems to be afoot, as three Mamdani-backed socialists won various New York Congressional district primaries (and are likely to win their respective general elections given the, uh, skewed political leanings of the greatest city in the world).

While memory prices, model restrictions, and midterms rightfully grabbed most of the headlines this week, more pressure continued to build in the private credit complex, as Apollo once again gated redemptions from one of its key funds, where withdrawal requests topped 17% in the second quarter.

Meanwhile, the latest data from the Federal Home Loan Banks (FHLB) System – a government-sponsored enterprise providing liquidity to various types of financial institutions – showed ~$80 billion of advances to life insurers in Q1, a significant Q/Q spike good for an all-time high and a move worth watching given life insurers’ outsized exposure to private credit.

Elsewhere in thorny credit risks, Strategy’s flagship preferred stock STRC continued to get, as the kids say, absolutely mogged, hitting a new all-time low of $72 this week on continued bearish price action in bitcoin.

Despite bitcoin’s ongoing summer doldrums, BlackRock publicly reiterated its guidance for investors to allocate 1-2% of their portfolios to Magic Internet Money.

Regulatory Update

The long-awaited CLARITY Act has continued to stall at the finish line in Congress, with a variety of issues impeding its progress toward passage ahead of the August recess, which is seen as the last chance to get the bill passed before 2029 given uncertainty around midterms. Senator Cynthia Lummis indicated a new draft aiming to address remaining issues should be released soon.

Noteworthy

DMND mining pool successfully mined the first known bitcoin block using Stratum V2’s block construction protocol. This represents a notable milestone for mining decentralization and censorship resistance as this tool allows miners (rather than the pools they use for hashrate aggregation) to directly control their own transaction selection.