As nature abhors a vacuum, so markets abhor a vertical chart. Even in the midst of wars, famines, heavy-handed state interventions, and Presidential AI slop, demand and supply responses inexorably work to bring both euphoria and depression back to reality. The market seems to be giving us more and more vertical charts lately as global change gets more discontinuous and nonlinear, and we got two this week that highlight a key dichotomy and open question we’ve been writing about for much of the last year: can the US weaponize its remaining advantages over China quickly and durably enough to provide the necessary air cover for critical industry reshoring? For now, China appears to be on its back foot, with local independent oil refiners (the main historical Chinese buyers of Iranian crude) taking an unprecedented bath on margins as the country’s government prevents refineries from passing on huge input cost increases prompted by US-led chaos in the Persian Gulf. At the same time, the “Don’t Call It a Comeback” tour for once-ailing American semiconductor stalwart Intel – perhaps the consummate poster child for the past 30 years of American industrial own-goals – continued its shocking run, with the stock up another 25% this week (after already ripping off a 140%+ YTD move beforehand) on news of a landmark deal with Apple partially coordinated by the White House. The Intel story no doubt remains highly speculative, as the company’s topline, EPS, and free cash flow all have yet to meaningfully inflect, though the market seems to be increasingly pricing in the potential that strategically important US industry champions are now too big to fail. These eye-watering moves notwithstanding, we expect market forces to eventually drive some level of mean reversion on both of these charts: China or the US will blink, deals will be cut, capacity will expand, demand will soften or reroute, new entrants will come online. Dread it, run from it, the supply response arrives all the same.

There is, of course, a third vertical chart that’s also drawing more and more mainstream attention, and which is arguably the underlying driver of the prior two. However you cut it, charts measuring AI capabilities are continuing to ramp parabolically, but unlike the other two charts, there’s no obvious market-based gating mechanism to enforce mean reversion here, other than the hard constraints of the physical reality (read: watts) needed to sustain ever-greater gains in these capabilities. But what if you’re in the middle of a Great Power Competition that pivots on who gets to own and control the curve that never mean-reverts? What if the incentives and exigencies at play have convinced decisionmakers that this is a winner-take-all game and that, because demand for intelligence is infinite, any level of investment and “creative” financing is justified? What if they’re right, and the implications for the labor market become more apparent more quickly? What if they’re wrong, and the players at the table have no way out but to paper over the resulting losses? In any of those worlds, all of which will be filled with many more vertical charts (direction TBD), what would be the value of the one asset on the planet with no possible supply response?

Selected Portfolio News

Strike continued its strong pace of new product introductions with a variety of announcements this week:

Unchained launched a new media and education campaign on bitcoin in partnership with The Atlantic:

Maple rolled out a new look, new features, and the brand new Maple Agent:

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.

Media

Ten31 Managing Partner Jonathan Kirkwood appeared on a panel discussing bitcoin and private credit at this year’s Bitcoin Conference.

AnchorWatch Co-Founder and CEO Rob Hamilton joined a panel on the intersection of bitcoin and insurance at the Conference.

Start9 Founder and CEO Matt Hill joined Ten31 Managing Partner Matt Odell on Citadel Dispatch to discuss Start9’s latest operating system and ambitious roadmap.

Matt also gave a talk on information sovereignty at this year’s Bitcoin Conference.

Market Updates

You already know the drill. In a series of re-runs that are quickly getting old, the week started off with attacks on the UAE and the US sinking some Iranian ships, but the US/Iran ceasefire is somehow still active.

Bond markets started to get a little queasier on the delayed progress in talks, with the US 30-year Treasury yield breaking through the 5% level for the first time in a year. Overseas debt markets saw more violent action, as the UK 30-year continued its recent run up to nearly a 30-year high.

But the classic market-managing playbook worked once again this week, as oil and yields fell on reports from Axios (why is it always Axios?) that the US and Iran are finally close to an elusive deal.

The S&P500 notched yet another record high on the news and hit its longest daily winning streak in two years, though as of Saturday morning the US is still awaiting a formal response from the Iranian side.

In the meantime, Treasury Secretary Scott Bessent said the US is successfully “suffocating” Iran’s oil industry as the country is closing in on a critical juncture for its oil storage capacity within the next several weeks.

A new “confidential CIA report” uncovered by the Washington Post this week suggested that Iran may be able to hold out much longer than that, though it’s unclear if Iranian officials themselves actually agree with that take.

In any case, Chevron’s CEO warned that oil shortages will soon start to become more prevalent (notably, beginning with Asia).

China told local independent oil refineries (who are key customers of Iranian oil) not to comply with US sanctions on Iran, an order that seems to have been met with mixed results so far.

New data out this week showed that use of the Yuan and CIPS (China’s answer to SWIFT) for sanctioned transactions jumped to a new high in March.

But at the same time, China also directed its banks to pause new loans to sanctioned refiners, while reportedly pressing Iran not to ramp up conflicts and come to a deal to resolve fighting in the Gulf.

American industrial policy saw its latest major manifestation this week in the form of a preliminary deal between Intel and Apple (partially orchestrated by the White House) for the long-underperforming American semiconductor giant to produce some chips for Apple products, which would be a very noteworthy shift given Apple’s decade-long exclusive relationship with Taiwan’s TSMC for its most advanced chips.

To be sure, it’s not totally clear which chips Intel will actually produce, when they’ll start, or what the revenue implications of the arrangement might be, but Intel shares rocketed higher regardless, making DJT Capital’s INTC position a 5-bagger since September.

Elsewhere in what has swiftly become the world’s most important industry, the US announced that Norway, home of the world’s largest sovereign wealth fund, will join Pax Silica, a consortium of 15 US-aligned countries focused on responding to Chinese dominance in critical minerals.

At the risk of stating the obvious, we don’t think we’re close to a global top on policymakers’ appreciation of the strategic importance of Intel and other lynchpins of the semiconductor supply chain, a theme that was further highlighted this week by preliminary benchmark data on Anthropic’s much-hyped Mythos model, which appear to be literally off the charts.

The Atlanta Fed’s GDPNow forecast jumped to 3.7% for Q2, while corporate profits through most of this quarter’s earnings season have continued to push higher in a fairly broad-based trend that seems to be supporting both large and small cap names.

Meanwhile, the latest jobs report came in better than expected, including a significant boost from trucking and freight, which may be the latest data point highlighting the early green shoots of reindustrialization activity.

However, this seems to be an increasingly bifurcated phenomenon, as large public tech companies like Cloudflare, Upwork, and Bill.com all announced 20%+ workforce reductions this week. All of these decisions were ostensibly driven by AI productivity gains, though as unprofitable or marginally profitable businesses with decelerating growth, we think there may be a little more going on under the hood.

Kraft Heinz’s CEO also struck a less optimistic tone in an interview this week, noting bluntly that “consumers are literally running out of money.” The CEO of McDonald’s was similarly pessimistic on the lower-income consumer on the company’s latest earnings call (admittedly, there may be some idiosyncratic GLP1 selection bias baked into both of these data points).

Coinbase had its own terrible, horrible, no good, very bad week, as it kicked things off by announcing layoffs affecting 14% of its workforce. The move was partially enabled by AI tools which have, per CEO Brian Armstrong, allowed non-technical people to begin pushing production code, which…uh, yeah.

The company then went on to post worse than expected Q1 results that marked its second consecutive quarter in the red.

Following last week’s Supreme Court redistricting ruling that gave Republicans a potential major win heading into midterms, Virginia’s Supreme Court stuck down a proposed electoral map for the state that could open up another opportunity for Republicans this fall. We’re not taking a view on either party, but these updates are worth watching as they could pave the way to what is currently a fairly counter-consensus view on the outcome for November.

Bitcoin couldn’t quite keep up with stocks this week, but it did maintain its recent directional strength and touched $83,000 before retracing a bit. Notably, Brown University’s latest 13F filing showed that the prestigious endowment held pat on its bitcoin position despite all of the first quarter’s volatility.

Strategy Executive Chairman and Bitcoin Slop Connoisseur Michael Saylor ruffled many feathers this week when he suggested the company will consider selling some bitcoin to pay dividends on its preferred stack, ostensibly just to “inoculate” the market to such a move.

CME Group plans to launch regulated bitcoin volatility futures starting next month, the same day it begins offering 24/7 digital asset derivatives trading.

Regulatory Update

The long-delayed CLARITY Act got yet another new compromise revision that seems to appease most sides at the table. Congress is scheduled to vote on the new version next week.

White House digital assets adviser Patrick Witt suggested an update on the Strategic Bitcoin Reserve will be released in the next few weeks.

Noteworthy

A researcher at Paradigm proposed a new quantum “escape hatch” protocol that could give holders of quantum-vulnerable coins a potential path to reclaiming compromised funds in the future without a soft fork today (though a fork would eventually be required).

Another week of limited Strait of Hormuz traffic, another all-time high for equities. Markets are not clairvoyant (see 1929, 1987, 1999, 2008, 2021…) but they are forward-looking, and the past month’s price action is telling you something about where the investing hivemind believes the world is going with or without an official grand bargain between Orange Man and the IRGC. While bitcoiners and crypto influencers converged on Vegas this week to once again learn the meaning of negative-sum games (and we’re not just talking about the slot machines), global energy markets saw a couple headlines that we think help explain recent equity strength and will prove to be monumental developments when historians HistoryProfessorGPT eventually writes the consensus narrative on this period. First off, US exports of oil, natural gas, and jet fuel surged to new all-time highs, putting the country in league with Saudi Arabia for crude exports despite shipping virtually zero barrels only a decade ago. Even more significantly, the United Arab Emirates – which Treasury Secretary Bessent confirmed is in talks for a standing dollar swap line with the US just last week – announced it will immediately exit OPEC, the Middle Eastern oil cartel that has driven a structural floor for global energy prices for over half a century. While we can’t say for certain that those two UAE developments are directly related, we see strong odds that they collectively represent the latest bright-red signal pointing to the US’s efforts to shore up its own major sphere of influence as it looks to exert more control over energy markets, strengthen dollar dominance, and curb China’s rise.

As we’ve reiterated several times in recent months, this overall strategy is path dependent and subject to many risks, but the second-order effects of its potential success are well worth keeping in mind. If the US succeeds in securing imperial fealty from (or, more diplomatically, deepening its relationships with) various sovereign players with strategic access to critical resources and maritime routes while also wresting back control of the offshore dollar market, we think this strongly favors incremental medium- to long-run headroom for expansion of fiscal deficits and a more sustained multiplication of global dollar claims. That capacity would be further expanded by long-run structural downward pressure on energy prices (a key input to reported inflation, and in turn a key input to long-end yields); this is perhaps a tough call to make with oil over $100/barrel, but maybe not as hard to envision longer term if the US plus a friendly Alberta commit to the Sarah Palin playbook and the Middle East shades away from reflexive, centrally coordinated output cuts every time prices drift a bit too low (all of which may help to explain the persistent steep backwardation of oil futures despite no clear progress for months in the Strait of Hormuz). The totality of these forces would likely be very pro-dollar liquidity, and while markets aren’t perfect prognosticators, if a niche Substack can put these pieces together, we think it’s at least plausible that recent price action is beginning to discount this general scenario as well. It’s all a game of branching paths with varying probabilities, but if this one proves to be correct, we continue to believe the environment it creates will imply significant dollar-denominated tailwinds for the world’s scarcest assets.

Selected Portfolio News

Strike made a variety of major product announcements at this week’s Bitcoin 2026 Conference:

Twenty One Capital also proposed a business combination with Strike, further details of which can be found in Jack Mallers’ keynote at Bitcoin 2026:

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.

Media

Strike Founder and CEO Jack Mallers was featured in a conference discussion regarding the evolution of bitcoin’s role as a medium of exchange.

Fold’s new bitcoin bonus program and broader business platform was featured in Decrypt.

Market Updates

After promising the hostilities with Iran would be over in 2 weeks, then 4-6 weeks, then by summer, President Trump said this week that he now has no particular timeline to wrap things up, and that he doesn’t even care if the episode ends in time for midterm elections.

The Wall Street Journal, meanwhile, reported that the President is telling his close advisors to prepare for an extended blockade.

After the White House canceled its planned visit to Pakistan for another round of talks last week, Iran has reportedly submitted multiple proposals to get discussions moving, but as of Friday, the US has said it’s still not satisfied with whatever it’s seeing from the Iranian side.

As Abraham Lincoln said, you shouldn’t believe everything you read on the internet, but reports out of Iran increasingly suggest that delays in talks may be bringing the country’s oil industry dangerously close to a “tank top” moment – the point at which all storage facilities are full and production would need to rapidly wind down – which some analysts believe could come in a matter of weeks.

Either way, in a headline believed by tens of people, the White House officially informed Congress that the war has been terminated ahead of the expiry of President Trump’s 60-day window to secure Congressional authorization.

Amid the global energy disruption caused by the conflict, US exports of oil, liquid natural gas, and jet fuel all reached record highs, and Energy Secretary Chris Wright suggested the US is “absolutely not” considering an export ban on petroleum products (we can’t help but think there’s an implicit “unless” in there somewhere).

That said, the backdrop remains stretched, as oil prices for both WTI and Brent ripped past $100/barrel again, and ExxonMobil’s CEO told investors that the market has not yet reflected the full impact of the disruption.

One development that may be crucial over the medium term was the UAE’s announcement – just a week after reports of its negotiations for dollar swap lines – that it will exit OPEC effective immediately, potentially opening up significant additional headroom for oil production:

Meanwhile, the New York Times ran a feature highlighting the growing impact of energy disruptions on China’s manufacturing base. On the flipside, China did increase its fuel exports M/M, suggesting at least relative near-term energy stability, though it has maintained tight export controls overall.

Elsewhere in global US meddling geostrategic influence-building, US Undersecretary of State Jacob Helberg highlighted a massive new forward deployed industrial base in the Philippines intended to “secure vital supply chain inputs” in cooperation with the US ally.

On the same note, the Wall Street Journal published a piece on the Pentagon working with rare earths producer Lynas to break China’s near-monopoly on samarium – a key input for various defense applications – with a new refinery in Malaysia.

Despite various plans and schemes clearly geared toward a US industrial renaissance, US GDP has still not shown clear evidence of success, as Q1 GDP growth came in slightly below expectations at just +2%.

However, some industrial green shoots were visible under the hood, as core capital goods orders grew 3.3% M/M to the highest level since mid-2020. At the same time, the latest US Manufacturing PMI reading came in at 52.7, in line with last month and good for the fourth consecutive month of expansion after years in contraction territory (though that came with a big spike in the prices paid component).

Two new reports of distressed multi-billion dollar private credit loans in blue chip funds added to ongoing concerns about this pocket of private capital this week, as the non-performing loans ratio in Blackstone’s massive BCRED fund jumped to an all-time high of 2.4% (vs 0.3% a year ago).

While he doesn’t think the private credit market is large enough to become a systemic threat, JP Morgan CEO Jamie Dimon channeled his inner Peter Schiff and Ray Dalio in an interview this week, suggesting that we are likely heading toward “some kind of bond crisis” due to rising government debt and fragility in various sectors.

If Dimon is right, that will certainly present an interesting wrinkle for the ostensibly hawkish balance sheet strategy of Kevin Warsh, who cleared a key hurdle this week on his way to officially taking up the mantle as the next Fed Chair.

In a written response to questions from Congress, Warsh tellingly suggested that the Beltway establishment’s much-prized notion of Fed independence “may not extend to areas like international finance” in reference to the potential for Treasury swap lines with the UAE and other allies.

But Warsh’s less conventional views may see some additional friction early on, as current Fed Chairman Jerome Powell confirmed he plans to stay on board as a Fed Governor at least until the Trump administration’s investigation into the Fed’s new headquarters has wrapped up.

Elsewhere in DC machinations, a Supreme Court decision on local redistricting this week may have meaningful implications for the balance of power in midterms, potentially tilting an advantage toward the Republicans if they can force electoral zoning changes quickly enough.

As markets broadly shrug off the stalemate in the Persian Gulf, bitcoin ETFs pulled in $2 billion in April, good for their best month of the year so far.

Meanwhile, Alberta Investment Management Corporation, a Canadian pension fund with nearly $200 billion in AUM, disclosed a $219 million position in Strategy common stock for the first time.

Regulatory Update

Following up on commentary from some military officials regarding bitcoin’s role in “power projection” over the past few weeks, Department of War Secretary Pete Hegseth said the Pentagon is working on various “classified bitcoin projects.”

Acting Attorney General Todd Blanche made comments that were directionally friendly toward bitcoin developers at this year’s Bitcoin 2026 Conference, though unfortunately the talk track still leaves wiggle room for prosecutions of noncustodial software developers.

Noteworthy

Legendary investor Paul Tudor Jones, a longtime fan of bitcoin, suggested in a new interview this week bitcoin is “the greatest inflation hedge available” given its absolute scarcity.

Block’s Bitcoin Product Lead Miles Suter said that over 800,000 merchants have activated bitcoin payments on Square terminals since the company began rolling out the capability earlier this year.

Pseudonymous ecash wizard Calle announced he’s working on a potentially monumental upgrade to ecash that would solve many of its key drawbacks, potentially laying the foundation for a fuller realization of the “bitcoin banking” vision.

The market decided to party like it’s 1999 this week, all the way down to a new all-time high for *checks notes* Intel. We may have less clarity than ever on how much oil will be allowed to flow through the Strait of Hormuz by this time next year, but investors have largely shrugged off that pesky question, as all major indices have moved aggressively higher while bond volatility compresses and the 10-year yield stays rangebound. We have no crystal ball on whether these trends can sustain themselves in the coming weeks, but this sequence of events is admittedly fairly problematic if your main heuristic for analyzing the Trump administration’s constraints revolved around the President’s sensitivity to financial market turbulence, which was supposed to be unavoidable and cataclysmic in any bout of extended volatility in the Middle East. Some may object that US financial markets are increasingly manipulated to absorb and offset the downside that should be prevailing right now, and we’d probably agree to a large extent, but that’s also the point: the name of the game is whether the US can use its exorbitant privilege of dollar supremacy (while it still lasts) to facilitate a realignment of the global chessboard in its favor. Time will tell whether the airplane can be repaired mid-flight (particularly given downstream commodity impacts that are piling up every day), but one team clearly has the right to yell “scoreboard” at this point in the action.

We’ve been beating the drum on this theme for the better part of a year, but this week was especially loaded with more signposts in this direction, including a move toward more standing dollar swap lines for key Gulf and Asian allies, a US-financed takeover of a major Brazilian rare earths asset (complete with price floors and long-duration offtake agreements), explicit international coordination with Western vassals allies to ramp up production of critical materials (at the expense of anyone not in the club), and wide-ranging executive orders authorizing aggressive reshoring and decoupling actions in the energy and power markets. As always, none of this is guaranteed to succeed, but it’s hard not to see the direction of travel, and with the President now closer than ever to getting his Number One Boy in the big chair at the Eccles Building, we don’t expect the financial backdrop necessary for this transition to get any less accommodative. To paraphrase renowned American philosopher Randall Savage: you may not like it, but accept it (and allocate accordingly).

Selected Portfolio News

Fold launched its new Fold Business platform:

Mempool.space shipped v3.3 of its industry-leading dashboard and analytics suite:

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.

Media

AnchorWatch Co-Founders Rob Hamilton and Becca Rubenfeld appeared on the Bitcoin Archive podcast to discuss AI’s intersection with their business and startups more generally.

Rob also appeared on What Bitcoin Did to discuss how to handle quantum-vulnerable bitcoin over time.

Market Updates

The nation continued to sit gripped by one of history’s great will they / won’t they dramas this week, as tensions between the US and Iran once again flared up, with intermittent skirmishes initiated by both sides throughout the week.

On Tuesday, after going deep on the important issues like how NIL is ruining college sports (co-signed, FWIW), Trump assured his Squawk Box audience that “we’re going to make a great deal” before the end of the two-week ceasefire on Wednesday.

Though just before the expiration of one of the more hostile ceasefires in history, the President extended the window for talks indefinitely, ostensibly due to Iran’s failure to present a unified proposal due to its “seriously fractured” leadership. That said, the US is continuing its blockade of Iranian ports while talks are ongoing.

Shortly thereafter, Iran announced it had seized two container ships in the Strait of Hormuz, while the US Navy boarded and commandeered a sanctioned oil tanker in the Indian Ocean, allegedly “without incident.”

On Friday afternoon, the White House announced that Steve Witkoff and Jared Kushner (notably sans the Vice President this time) were en route to Pakistan for direct talks with Iran, or at least some faction thereof. But even with those two in the air, Iran publicly insisted no meeting is set to take place.

We can only hope a deal is signed imminently, otherwise there’s no telling how many more oil tankers will fall prey to crypto scammers impersonating the IRGC.

The revived uncertainty pushed oil prices higher on the week, though key benchmarks remain well below recent highs. The market broadly seems to have become numb to all the maritime whiplash, as the US 10-year yield was flattish on the week (with the MOVE Index basically back to pre-war levels) while the S&P500 again made new all-time highs.

With Middle East oil revenues in flux and growing Fintwit chatter about the emergence of the “petroyuan,” the Wall Street Journal reported this week that the UAE has initiated talks about establishing a swap line with the US, a relationship that only five central banks have on a standing basis.

During Congressional testimony this week, Treasury Secretary Scott Bessent confirmed that swap line talks with both Gulf countries and Asian allies are ongoing, framing these discussions as an opportunity to extend dollar dominance and further entrench the dollar’s network effect.

Interestingly, the UAE is reportedly also moving to bucket its China investments into a segregated arm of its sovereign wealth holdings. We have our suspicions on what this indicates, but people will see what they want to see in that headline.

Arguably the more important headlines from the week came on the domestic side, as the US continued to ramp up its overt shift toward wartime industrial policy by facilitating USA Rare Earths’ acquisition of Serra Verde, a major Brazilian rare earth miner, for $2.8 billion.

The miner represents the only scaled producer of all four magnetic rare earths outside of Asia, and in a bright red signpost, the deal includes $565 of Development Finance Corporation (read: Pentagon) funding and a 15-year, 100% offtake agreement with defined price floors backed by the US government.

That same day, US Trade Representative Jamieson Greer called for shared price floors and trade barriers on critical minerals among a club of Western allies in opposition to China. Greer noted that the West needs to be ready to pay a “national security premium” for production of these critical materials.

Despite some immediate grumbling and pushback among the likely members of that club, the EU later announced a new MOU on critical minerals cooperation with the US, explicitly pointing to the potential for “border-adjusted price floors, standards-based markets, price gap subsidies and offtake agreements” (following, of course, the consummately European “exploration of a broad range of trade policies and instruments to reinforce coordinated international action”).

On an even wider scale, President Trump signed a flurry of Executive Orders declaring states of emergency on US electrical infrastructure and domestic production of oil, natural gas, and coal. The orders authorize the Department of Energy to make purchases and financing commitments as necessary to address supply chain vulnerabilities and over-reliance on foreign imports across these industries.

Amid all these aggressive industrial maneuvers, the Wall Street Journal published a timely article on America’s “stealth manufacturing boom.” To be sure, it’s very early days; semiconductors (arguably the most pivotal industry in the world at the moment) remain skewed toward foreign reliance; and nothing about this strategy guarantees that US citizens will necessarily get richer in real terms even if it works, but the playbook looks increasingly clear by the week.

On this same theme, Japan lifted its multi-decade export ban on defense technologies for a select group of countries including the US, UK, NATO members, and a few Asian neighbors (readers might hazard a guess as to who was excluded). On the other side of the world, the Wall Street Journal ran a feature on Germany “reinventing itself as a weapons factory.”

While the US continues to shore up its circle of friendlies, it’s also ramping up efforts to punish defectors, as a leaked internal Pentagon memo reportedly floated various punitive measures for Spain and other NATO members that have not supported US actions in Iran.

Regime change has been the term du jour on the war in Iran, but it got a different twist this week as Kevin Warsh, President Trump’s nominee to succeed Jerome Powell as head of the Federal Reserve, went to Capitol Hill for the customary Congressional kayfabe. Warsh reiterated his desire for structural shifts in Fed operations, noting he’ll push the institution to move past outdated academic models and quarterly “forward guidance” jawboning.

Mr. Warsh also reemphasized his view that the Fed can both lower benchmark interest rates and meaningfully reduce the size of the Fed’s balance sheet over time in coordination with the Treasury. We’ll just say we remain skeptical on this point (and we’re in good company here).

Much of Warsh’s framework seems to be based on an expectation for an oncoming deflationary AI productivity boom that will give the Fed more headroom to cut rates. Perhaps, but this week gave us another headline pointing to a different wrinkle the Fed may need to address if Warsh’s view plays out, as large-scale layoffs at Meta and Microsoft sparked renewed fears about AI disruptions to employment.

Finally, the nominee emphasized that President Trump never demanded that he lower interest rates upon taking the job. Apropos of nothing, Trump said on the same day that the next Fed chair should cut rates right away and that the US should have the lowest rates in the world.

In any case, the nomination now appears more likely to move forward, as the Department of Justice dropped its investigation into current Fed Chair Powell, theoretically clearing the way for full Republican support of confirming Warsh (though Press Secretary Karoline Leavitt suggested the investigation is “not necessarily dropped” just yet).

The Trump administration began doling out tariff refund payments that will eclipse $160 billion to various businesses over the next several months. This may have some near-term stimulative impact, though we strongly suspect that tailwind may be offset by replacement measures under a different regulatory framework.

A US Admiral touted the national security implications of bitcoin in his Congressional testimony this week, and doubled down in a separate hearing with the claim that bitcoin is a tool for power projection while noting the military is running its own bitcoin node. The admiral was quick to deemphasize bitcoin’s monetary properties, so we’ll admit this all sounds like the military version of “blockchain, not bitcoin,” but it’s no doubt noteworthy to see this conversation playing out on a stage like this.

Strategy announced the purchase of over 34,000 bitcoin, almost all of which came from issuance of the company’s STRC preferred stock. STRC has now cumulatively driven the purchase of nearly 100,000 bitcoin, and the company holds over 815,000 bitcoin, officially surpassing IBIT.

Wealth management bellwether Charles Schwab released a suit-friendly educational video on bitcoin for its 40 million clients as it launches bitcoin trading on its platform.

Regulatory Update

New York sued Coinbase and Gemini over their launches of prediction markets, calling these products “quintessentially gambling.”

After several weeks of apparent momentum, the long-awaited CLARITY Act market structure bill appears to be delayed once again.

Noteworthy

Bitcoin on-chain metrics analyst James Check – for our money, one of the most consistently sober and high signal voices in bitcoin – published a report assessing the potential price impact of a sudden theft and sale of Satoshi’s quantum-vulnerable bitcoin. Check concludes that such an event would be well within the bounds of what investors already absorb during bear market capitulation events.

Project 11, a startup focused on quantum-proofing digital asset infrastructure, awarded a 1 bitcoin bounty to a hacker who claimed to have used a quantum computer to break a 15-bit ECC key, ostensibly the largest successful quantum cryptographic attack in history. Underlying details of the attack may suggest there’s more than meets the eye here.

In more legitimate hacking news, DeFi protocol KelpDAO (the exact name of something you’d expect to be a pillar of the future of finance) was hacked for nearly $300 million, driving widespread contagion across various crypto ecosystems and once again highlighting the fragility of the broader “crypto” universe. In response, Arbitrum, one of the most popular (and ostensibly decentralized) Ethereum L2s, unilaterally froze $90 million of assets.

Meanwhile, leading stablecoin issuer Tether froze $344 million of its tokens on the Tron blockchain in coordination with OFAC. Treasury Secretary Scott Bessent later indicated these funds were allegedly linked to Iran.

Travel

• Bitcoin 2026, Las Vegas, April 27-29

It turns out having the biggest stick still matters. After weeks of many analysts tap-dancing on the apparent grave of US military hegemony as traffic through the Strait of Hormuz remained disrupted by Iranian attacks, the US took the dramatic step of moving a group of aircraft carriers and destroyers into position to blockade Iran’s ports, immediately disrupting millions of barrels per day in oil and potentially putting the war-torn and export-dependent country in dire straits. It remains to be seen how well this will work in the long run, and whether the downstream impacts of disruptions in the Gulf will cause the US to blink before Iran and its Eastern proxies (though newsflow for most of the week clearly favored one more than the other), but we think it’s fair to say that the TACO meme has officially grown stale. Many commentators have spent the past couple decades highlighting, with good reason, how the US is showing all the signs of a decaying Great Power – and the decadent AI slop posted by its Commander in Chief may be particularly strong evidence for this thesis – but we think the events of the past few months, and especially this week, speak more to the US’s full embrace of the imperial phase of the Great Power cycle. We don’t celebrate this trend by any means, but it’s increasingly tough to deny all the ways the US is consolidating leverage and carving out a hard sphere of influence around the world (a large collection of which are documented below).

While we moonlight as armchair geopolitical Situation Monitors, we are humble bitcoin stackers at heart, and we think the implications of these trends remain underappreciated for bitcoin. The machinations of this administration are far from guaranteed to work, but what if they do? What if the US is able to – through influence, force, spycraft, financial incentives, maritime controls, Artful Deals, or all of the above – establish and protect a firm sphere of dollar- and Treasury-friendly partners among the GCC, Japan, Korea, and commodity-rich South American countries? What if it’s able to leverage its position as the world’s largest consumer, net energy exporter, and operator of (for now) the world’s most important financial rails to secure favorable deals for key resources? What if it succeeds in using a captive audience of onside trade surplus countries (plus some backdoor Fed support) to stabilize Treasury yields long enough to pursue reshoring of key industries? What would the headroom for issuance of dollar claims created by that framework imply for the dollar-denominated price of the globally available, politically neutral, scarcest asset in human history? What if the dollar doesn’t need to collapse for owning bitcoin to make sense?

Selected Portfolio News

Strike’s line of credit product now supports interest rollovers:

And Strike opened up term loans and BLOC access to South Dakota:

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.

Media

Ten31 Managing Partner Matt Odell appeared on RoxomTV to discuss the rise of bitcoin treasury companies.

Fold Founder and CEO Will Reeves was featured in a profile on CCN.

Market Updates

After the market got all hot and bothered by last week’s ceasefire news, Vice President JD Vance rained on the We’re So Back parade over the weekend by announcing that his talks with Iran had concluded with no deal.

President Trump immediately announced the US would initiate a full naval blockade of Iranian ports, playing the classic “you can’t blockade me, I’m blockading you” reverse card.

While there were legitimate concerns over the quick escalation that might happen if the blockade were tested, the maneuver appeared to hold up through the week, as the Navy turned away or interdicted (a word we all totally knew before this week) dozens of ships without major incident.

At the same time, the Treasury Department ramped up Operation Economic Fury, extending sanctions on various individuals and companies in the Iranian oil industry, while noting temporary authorizations to sell Iranian oil will not be renewed. The Treasury also reportedly issued warnings to Chinese banks with ties to Iranian fund flows.

Bloomberg put out a feature highlighting how disruptive an extended blockade would be for Asian economies, with comparatively little direct damage to the US. Of course, the downstream impacts like fertilizer production remain a major concern, and in any case the move won’t be cost-free for President Trump, as he admitted this week that gas prices may remain elevated through midterms.

However, the President reiterated mid-week that it will all be over very soon, after which point the stock market “is going to boom.”

Shortly thereafter, the administration announced that Iran had agreed to surrender its enriched uranium – a key point of contention in negotiations – and Iran announced (on the back of a 10-day ceasefire between Israel and Lebanon) that the all-important Strait of Hormuz would be open to all traffic during the ongoing ceasefire.

These headlines sent oil prices tumbling more than 10% lower on Friday and pushed equity indices firmly back to new all-time highs – more than erasing losses since the start of the war – as bitcoin surged back to $78,000 before retracing a bit early Saturday.

That said, the whole situation continues to be history’s largest double-slit experiment, as the President later suggested that the naval blockade would remain in force until a final deal is reached, prompting Iran (or some faction thereof) to respond Friday night that it has actually rejected the uranium deal and that traffic through the Strait of Hormuz will remain restricted as long as the US blockade stays in place.

Our guess is that consensus on the situation will transition from wave to particle several more times before markets open on Monday, but lost in the shuffle of the week were several more examples of the US consolidating power abroad, including a “major defense cooperation partnership” with Indonesia, which may be particularly noteworthy for a maritime-focused administration given the importance of the Strait of Malacca.

Elsewhere, the UK agreed to pause its handover of the Chagos Islands to Mauritius following pressure from the US. The islands are home to the Diego Garcia airforce base, often thought to be a key military asset for the US’s influence in East Asia.

The week also saw several noteworthy headlines for the US-China relationship, which we’ve argued is the closest thing to a Rosetta Stone for Trump 2.0 that we’re going to get. First off, the President threatened 50% tariffs on China if they supply Iran with weapons as rumored last week; shortly thereafter, the Middle Kingdom allegedly assured the President it would hold off.

An in-depth article from the Financial Times highlighted China’s recent aggressive push into advanced tech exports, which has put competitive pressure on prized industries of many Western economies. On the flipside, after a strong start to the year, Chinese exports were up only 2.5% in March, and were significantly outpaced by imports.

In response to rising protectionism abroad, China imposed new rules to prevent multinational companies with operations in the country from pursuing a “decoupling” strategy for their supply chains.

Amid the recent fracturing of the World Is Flat global order, Russia reiterated support for China this week, offering to ramp up energy flows to backfill disruptions out of the Middle East. In a totally unrelated development, US officials suggested the military is gaining influence in Libya, progressively squeezing Russia out of its main resource-rich beachhead in Africa.

Back in the Western Hemisphere, the Pentagon is reportedly ramping up plans to make a move on Cuba following months of speculation in rags like this one, and President Trump said on Friday night that a “new dawn” is coming for Cuba very soon.

Meanwhile, Jair Bolsonaro – the MAGA-friendly former Brazilian President often dubbed the “Trump of the Tropics” – has now edged out Xi-aligned incumbent Lula as the Polymarket favorite to win Brazil’s next presidential election this fall.

Finally, Commerce Secretary Howard Lutnick indicated that the USMCA agreement – which governs trade between the US, Canada, and Mexico – needs to be significantly reworked during this summer’s renegotiation. Regarding the US’s relationship with Canada, Lutnick (ever the diplomat) noted that “they suck.”

Domestically, the military continued to move closer to the World War II industrial playbook, as the Pentagon has reportedly held discussions with American automakers including Ford and GM about leveraging their factory capacity to produce munitions and military equipment.

Despite the massive spike in oil prices over the past month, the latest Producer Price Index reading for March was up much less than expected at just +0.5% M/M, though that still works out to +4% Y/Y. Notably, Core PPI (ex-energy) was barely up at all on the month.

Almost all US bank quarterly earnings reports were generally solid this week, with Bank of America CEO Brian Moynihan indicating the US economy looks resilient. The strong headline prints may mask ongoing questions about the health of institutional balance sheets more generally, as the Federal Reserve has reportedly asked US banks for more detail on their exposure to the troubled private credit market.

Fed Chair nominee Kevin Warsh filed disclosures on his personal holdings this week that show he would be easily the wealthiest Chairman in history. However, Warsh’s path to actually landing the job was further complicated this week by another flare-up in the Powell / Trump feud, as prosecutors from the DOJ reportedly stopped by the construction site of the Fed’s controversial new building.

Like any good showman who knows people just want to hear the greatest hits, Trump revived his classic “I’m Going to Fire Too Late Powell” this week, noting he would have to remove the outgoing Chairman from the central bank if he doesn’t voluntarily step down from the Board of Governors.

Trump’s long-running focus on getting benchmark rates lower notwithstanding, Treasury Secretary (and close Warsh associate) Scott Bessent said this week that it’s reasonable for the Fed to “wait and see” what happens with energy prices before making any further moves on rates.

Despite the foreign chaos and a deeply uncertain regime at the Fed – which have ramped up calls for imminent international de-dollarization – Norway’s $2 trillion sovereign wealth fund says it has no plans to reduce US asset exposure. At the same time, three major Gulf States have raised ~$10 billion in cumulative dollar-denominated bonds since the start of the war.

All the same, former Treasury Secretary and TARP architect Hank Paulson told the press this week that regulators need to develop an emergency plan for an eventual “vicious selloff” in Treasuries.

Strategy’s STRC preferred stock ramped up its bitcoin acquisitions once again over the past two weeks, driving purchases of roughly 14,000 bitcoin last week and an estimated 17,000 this past week. The company noted on Friday that it will move to paying dividends twice per month to reduce face value volatility.

It was a very strong week for spot bitcoin ETFs, as the whole complex took in just under $1 billion of inflows. Morgan Stanley’s MSBT ETF – launched just last week – has already exceeded the AUM of WisdomTree’s bitcoin ETF.

Goldman Sachs jumped on the increasingly crowded bandwagon of traditional finance bellwethers launching mainstream bitcoin-linked products, as it announced its own bitcoin income ETF based on a covered call strategy.

Wealth management behemoth Charles Schwab announced that it will launch direct bitcoin trading on its platform in the next few weeks.

Regulatory Update

White House digital assets adviser Patrick Witt said this week that a list of roadblocks to passage of the CLARITY Act previously thought to be unsolvable have now been resolved.

The SEC published a path for some non-custodial digital assets tools to bypass broker registration rules if they meet a series of requirements. This doesn’t directly apply to bitcoin given its treatment as a commodity, but signals an ongoing shift in the broader regulatory understanding of non-custodial applications.

Noteworthy

Leading stablecoin issuer Tether launched tether.wallet, the company’s first product that directly interacts with end users. This development may align nicely with the glide path we projected for stablecoin issuers in our recent stablecoin deep dive.

Presidio Bitcoin released a summary of the current state of bitcoin’s readiness for the potential emergence of quantum computers. A key differentiated finding of the report is that actual on-chain migration from vulnerable addresses to post-quantum addresses may be much faster than is often feared.

A group of developers published BIP-361, a controversial proposal for post-quantum migration that would eventually render vulnerable coins unspendable. Major exchange BitMex, meanwhile, published a proposal for a “quantum canary fund” as an alternative.

Major US aluminum producer Alcoa is reportedly in advanced talks with NYDIG to sell one of its dormant smelter assets in upstate New York for use in bitcoin mining.

Travel

• Bitcoin 2026, Las Vegas, April 27-29

The memetic power of the Two Week Pause remains undefeated, as President Trump sent SPY shorts scrambling with his mid-week announcement of a 14-day ceasefire between the US, Israel, and Iran. Despite calling for the destruction of Iran’s entire civilization over the weekend, the President suggested mid-week that he sees a long-term path to peace, which may or may not include the US administering the Strait of Hormuz in a JV with Iran (never mind all the bilateral attacks that continued even after the announcement). Much could be said about what the President called the “world’s most powerful reset” on Friday, and we continue to think that the legacy press has largely missed the mark on thinking through the implications of what it would mean if there is actually some kind of intentional reset going on – maybe something like a global economic reordering? – but for our purposes, the most noteworthy development in the week’s flurry of headlines was the report that officials in Iran are requesting tolls from ships through the Strait paid in bitcoin.

To be clear, it remains uncertain how accurate this report was, and we think it’s fair to fade the notion of Iran durably extracting any kind of tax from waters that are technically the territory of another sovereign nation – unless by “Iran” you mean a subfaction of the increasingly divided Iranian government that may be more willing to cut a deal with the US and GCC. But the fact that such a headline could even seriously make the rounds in major financial media outlets and be treated as broadly plausible by generalists speaks to a growing understanding of bitcoin’s viability as “money for enemies” – that is, a neutral monetary network that does not depend on trust or revocable permission – that would have been basically unthinkable even five years ago. We expect this steady diffusion of knowledge about bitcoin’s properties to become increasingly valuable as key pillars of the Bretton Woods framework (e.g. the “special relationship” between the US and Europe) continue to break down and supply chains for key resources get more fractured along US / China fault lines. With those megatrends accelerating in the same week that the US Treasury and Federal Reserve called major bank CEOs to Washington for an urgent meeting – ostensibly about…cybersecurity? – it may make more sense than ever to get some just in case it catches on.

Selected Portfolio News

Strike’s line of credit product now supports interest rollovers:

And Strike opened up term loans and BLOC access to South Dakota:

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.

Media

Ten31 Principal John Arnold published an extensive research piece arguing that, contrary to the consensus framework, the growth of stablecoins is unlikely to depend on or drive value accrual to public blockchains in the long run.

Ten31 Managing Partner Matt Odell appeared on the Blockspace podcast for an update on OpenSats and the broader market.

AnchorWatch Founder and CEO Rob Hamilton joined the Build with Bitcoin podcast to discuss the early days of insurance markets in bitcoin.

Start9 Founder and CEO Matt Hill appeared on the Guy Swann podcast to discuss the company’s impressive new router, the latest advances in its product stack, and the state of decentralized AI.

Market Updates

President Trump wished everyone a lovely and totally normal Easter morning with a colorfully worded missive to his Iranian counterparts, then kicked off Tuesday morning with a message that “a whole civilization will die tonight” if Iran did not come to the table.

While the market waited with bated breath to see just how hyperbolic these latest Truths were, the US and Israel launched another strike on Kharg Island, a critical waypoint in the Strait of Hormuz.

But on Tuesday night, just about an hour before the ostensible 8pm deadline, Trump announced a two week ceasefire, claiming Iran has agreed to open the Strait and that he sees a long-term path to peace. Notably, several sources reported that the tipping point was increased pressure from China on the IRGC.

As part of the announcement, the President echoed his comments from several weeks ago that the Strait will be run by “me and the Ayatollah,” noting that the US will help with traffic through the waterway and that “big money will be made” as part of this new “joint venture.”

But the latest Artful Deal almost immediately hit several apparent snags the next day, as the Saudi East-West pipeline (the main alternative artery for shipping oil out of the region) was attacked, Iran suggested the US has already violated the ceasefire agreement on several points, and the UAE’s chief oil executive said that the Strait was effectively still not open as of Thursday.

Vice President JD Vance flew to Pakistan to hammer out more details of the ceasefire (or detente, or TV timeout, or whatever we’re calling this), though notably, there appears to be some confusion around which set of leaders and representatives will actually be speaking for “Iran” in these discussions, as internecine conflicts between the IRGC and other factions of the country’s government have become more visible. These divides may help make some sense of Trump’s frequent claims that “regime change has already happened,” and may be an important fault line worth watching as talks progress.

Early reports from the Iranian side suggested that the weekend’s discussions have already led to the US agreeing to release frozen Iranian assets held in Qatar, though the US quickly denied this was the case (an exclusive first look at the Iranian source of this information is available here). Even if something like this ends up in a final deal, it will be important to see which factions of Iran’s leadership might actually benefit.

Unfortunately, the hopes for a kumbaya session may be complicated by reports suggesting that Iran is having trouble actually increasing the flow through the Strait because it can’t remember where it left its mines. It probably also won’t help that, per US intelligence reports (which are of course famously reliable and trustworthy), China is preparing to supply Iran with new anti-aircraft weaponry.

Whatever the actual details and durability of the ceasefire – a question that Polymarket degens are once again grappling with as they discover the Oracle Problem from first principles – the announcement sent oil prices tumbling, with WTI and Brent both down nearly 20% on the news, while equities and the VIX moved back to basically pre-war levels. Crucially, volatility in Treasuries has also retreated to approximately pre-war levels.

Very notably, the Financial Times quoted an Iranian exports minister as saying that ships trying to traverse the Strait (at least, those that make it past the mines) are being asked to pay tolls in bitcoin.

It remains to be seen if this is true – and live reporting from Citrini’s Analyst #3 suggested payments are being made in diplomatic favors and handshakes rather than bitcoin, stablecoins, yuan, or anything else – but that it’s even a reasonable possibility highlights one of bitcoin’s key value propositions as money for enemies.

Amid all the ongoing Gulf disruption, three major US-aligned Gulf state sovereign wealth funds reaffirmed $24 billion in commitments to backstop Paramount’s takeover of Warner Brothers. This is an interesting signpost about the GCC’s financial position – and willingness to continue supporting Western capital markets – given reports from last month which suggested that the significant financial strains of the war have led these countries to reconsider their massive capital commitments to the US.

The week also gave us some noteworthy headlines about the ripple effects of the war on the global balance of power, as Asian and European economies are now seeing severe shortages in jet fuel and have begun imposing export controls.

Meanwhile, China is ramping up oil and LNG imports from the US for the first time in a year. On a somewhat related note, there appears to be a notable and atypical uptick in empty oil tankers transiting to the US to load up.

At the same time, The Hill ran a feature on China progressively losing influence in a variety of Latin American countries as the Trump administration looks to project a more, uh, “protective” posture in the Southern Hemisphere. On this point, those with their tinfoil hats at the ready may be interested to note a large explosion at the Bridge of the Americas this week that came close to blocking access through the Panama Canal.

That said, China also responded to global disruptions by announcing a ban on sulfuric acid exports beginning next month, a move that could send more shockwaves through an already weaker fertilizer market.

The Trump administration is reportedly exploring “punishments” for NATO allies that have failed to support US operations in Iran, the latest signal of the US’s willingness to shake up the chessboard of the old global economic order.

Perhaps having finally learned the lessons of 1971, France pulled its remaining sovereign gold reserves out of New York vaults. Interestingly, it apparently did so by selling in New York and buying with the proceeds domestically – if only there were some type of, say, digital gold that could be transferred in arbitrary size around the world and instantly verified in minutes.

The US trade deficit increased M/M in February, though was down 14% vs February 2024 (the last February comp before substantial tariff frontrunning skewed the figures). However, gold exports once again drove a sizable chunk of the normalized period over period improvement.

Domestically, the macro picture was mixed on the week, as the latest Services PMI declined more than expected M/M, though still remained firmly in expansion territory. The Logistics Manager’s Index, however, came in very hot with a large M/M jump and its best print since early 2022.

GDP growth for Q4 was revised down to just +0.5% from an already disappointing +1.4% initial read. Headline CPI of +3.3% was in line with consensus, though core inflation (ex-energy) rose only 2.6%, slightly below expectations, potentially giving a little more air cover to a Fed that – per the latest minutes, which still suggest another rate cut this year – seems reluctant to hike into an energy shock.

Carlyle became the latest asset management platform to limit redemptions from a multi-billion dollar private credit fund, as it reported requests to redeem almost 16% of its $7 billion CTAC fund. As part of this update, Carlyle noted that investors’ inability to get out of other funds over the past month contributed to its own redemption pressures (the textbooks have a word for that phenomenon, I think it rhymes with “fun”).

A new report by insurance rating agency giant AM Best suggested portfolios across the annuity-selling space are “significantly worse off” than they were on the eve of the Great Financial Crisis thanks to recent growth in private credit exposure.

In response to the ongoing stream of questionable private credit headlines, the Treasury Department scheduled a meeting with state insurance regulators to review ratings assigned to over $400 billion in private credit instruments that may have been too generous or insufficiently supported.

Elsewhere in eyebrow-raising government meetings, Treasury Secretary Scott Bessent and Fed Chairman Jerome Powell “urgently summoned” every major bank CEO (except, notably, Jamie Dimon) to Washington this week, ostensibly to discuss potential new cybersecurity threats posed by Anthropic’s much-discussed but still mostly unreleased Mythos model. Once again, our tinfoil-clad readers may fairly ask if such an emergency meeting of the most powerful regulators and financiers in the world during the most geopolitically turbulent moment in the last 50 years might actually have been about something else.

Morgan Stanley’s MSBT ETF officially went live this week and got off to an extremely strong start, with volume and inflows putting it in the top 1% of ETF launches historically. The firm’s head of digital assets indicated that MSBT posted the best first day volume of any ETF they’ve launched.

BlackRock also quietly filed for a new income-oriented bitcoin ETF.

Regulatory Update

Treasury Secretary Bessent penned an editorial in the Wall Street Journal about the importance of passing the CLARITY Act as soon as possible. Coinbase CEO Brian Armstrong tweeted this piece out in agreement, suggesting that Coinbase – which, per reports, has been at odds with the administration about recent drafts of the bill – is now aligned and ready to move the legislation forward.

That said, the bill’s protections for developers of noncustodial software apparently remain a sticking point with some law enforcement and regulatory groups.

The OCC granted conditional approval for Coinbase’s national trust charter.

Noteworthy

Potential mitigation measures for the possible eventual emergence of a quantum computer continued to roll in this week, as Starkware CPO Avihu Levy published a proposal to for quantum-resistant bitcoin transactions without a soft fork (though the idea comes with some notable current drawbacks including cost to execute and relaying the resulting non-standard transactions).

Meanwhile, bitcoin and lightning developer Olaoluwa Osuntokun published his own proposal to better protect vulnerable coins in the case of an emergency soft fork. And just for good measure, Daniel Buchner posted a framework for post-quantum signatures that would also not require an immediate soft fork.

Osuntokun also released a helpful comprehensive technical tracker of the extensive and multifaceted work already in progress to develop various quantum-resistant solutions.

For the first time in history, the UK’s welfare spending by itself now exceeds the country’s total tax receipts. Some leading mathematics experts have suggested the situation may be unsustainable.

Apple complied with an order from the Chinese government to remove BitChat – a decentralized messaging app developed by Jack Dorsey that leverages Bluetooth and mesh networks – from the local app store.

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

Over the past two years, and especially since the beginning of Trump 2.0, it has become de rigueur to assume and confidently proclaim that stablecoins are set to become the “killer app of crypto.” Bellwethers of traditional finance from Larry Fink to Jamie Dimon have pivoted from begrudging acceptance to outright promotion of stablecoins, while supportive statements by the Treasury Department and Fed Governors have poured fuel on the fire, hinting at stablecoins as the marginal release valve for the accelerating flood of US debt issuance. Even last year’s flagship Bitcoin Conference tilted heavily toward stablecoin content, and enthusiastic acolytes like Tom Lee have filled up long blocks of CNBC airtime promoting their visions for a future of dollars running on blockchain rails and banking stacks reworked around projects like Ethereum and Solana.1

There may be elements of truth beneath some of these headlines, and stablecoins have no doubt shown robust traction for several use cases – in particular, offering a new form of dollar access to economies with weak local banking and currency options – but there is strong reason to believe blockchain-based stablecoins as currently conceived and implemented are far from the panacea their advocates claim. The near- to medium-term future will probably include an expanded role for various (and variously dystopian) incarnations of a digital dollar, but the inherent trade-offs of blockchains mean that their applicability to dollar-linked payments and banking infrastructure will likely be limited, and long-term value capture will shift away from the blockchain projects that many analysts and investors too complacently view as the “picks and shovels” of the emerging digital dollar ecosystem.

What We Talk About When We Talk About Stablecoins: Some Taxonomy

Before diving in, we should clarify a few key terms that define our focus for this discussion. Most importantly for our purposes, a stablecoin here refers to a digital asset issued by a counterparty intended to be convertible at par with one US dollar, and where that “peg” is maintained largely or entirely by an issuer’s highly liquid, dollar-denominated cash collateral (typically some combination of bank deposits, short-dated US Treasury bills, and / or money market funds). This definition covers the most widely used stablecoins in circulation today and aligns with emerging regulatory frameworks like the GENIUS Act in the US. Some issuers have also launched so-called “algorithmic” stablecoins that attempt to provide a synthetic dollar peg using assets outside the dollar system, but these are famously fraught with operational risks and design difficulties, and in any case account for a small share of global stablecoin volume, so we will look exclusively at conventional, fiat-backed stablecoins like Tether’s USDT and Circle’s USDC.

Throughout the discussion, we will also make frequent reference to “public blockchains,” which – in contrast to permissioned networks run by whitelisted consortia that look more like private shared databases – are transparent and openly accessible networks that attempt to offer permissionless, globally available, peer-to-peer transactions on distributed ledgers without reliance on central operators. The most prominent examples of such public blockchains are Ethereum, Solana, and Tron, and these systems have historically accounted for the vast majority of global stablecoin activity. Most of our commentary will therefore reference these ecosystems as touchstone examples, but the framework is broadly applicable across blockchains. Furthermore, we will be looking at the public blockchain use case for stablecoins specifically; attentive readers may intuit that we are skeptical of most other blockchain claims (e.g. the tokenization of “real-world assets”), but all of our evaluation here will focus only on stablecoin applications. To put a finer point on it, our purpose is not to evaluate whether some form of digital dollar will gain traction, but specifically whether public blockchains will actually be necessary for and durably benefit from any such traction in the long term.

Finally, our commentary here will be limited to popular claims about what stablecoins transmitted on public blockchains can functionally accomplish. There are a variety of more abstract (though no less critical) questions that won’t be addressed here – e.g. the long-term security implications of the Proof of Stake consensus mechanism used in many of these blockchains; the viability of any blockchain whose endogenous settlement unit does not successfully compete as money; and many others – but we encourage interested readers to consult the linked resources for further discussion.

Is “The Blockchain” In the Room with Us Right Now?

It’s important to start by unraveling one common piece of shorthand that plagues a good deal of mainstream stablecoin discourse, especially among generalist investors and observers. Many commentators on this topic tend to draw comparisons between “the blockchain” and “the internet,” creating the impression that the blockchain is a comparable type of abstract, general-purpose software overlay that can connect a diverse, global, arbitrarily large set of endpoints to facilitate transactions. However, this ignores a key fundamental difference: the internet is one, open, interoperable protocol (or, more accurately, one protocol stack) around which billions of users have converged for standardized information transfer, resulting in massive unifying network effects. In stark contrast, there is no “the blockchain,” only a fragmented collection of individual blockchains – Ethereum, Solana, Tron, and thousands more – each with its own set of protocol rules, design choices, and very limited native interoperability. The next time you hear that “the future of finance is on the blockchain,” your first question should be: “Which one?”

Far from just a semantic dispute, this confusion actually reveals a significant misplaced assumption that all the relevant computational and security work needed to facilitate stablecoin transactions can just be outsourced to some vaguely defined technological deus ex machina. In reality, stablecoins do not run on “the blockchain,” but rather on “a blockchain”: any given stablecoin transaction takes place on a single, specific chain, and those individual chains are effectively each their own incompatible walled gardens. For example, a balance of Tether’s USDT – the most widely used stablecoin globally – held on the Tron blockchain is not natively fungible with a USDT balance on Ethereum or Solana. Interactions between USDT holders on different chains require the use of “bridges” and / or third-party intermediation of some kind, exposing users to additional fragility and risk: these systems have have driven at least $3 billion of lost user funds over the past several years, underscoring just how far these projects are from the internet’s robust, standardized interoperability. Furthermore, the number of such proposed bridging solutions has exploded in the last several years, exposing participants to more operational overhead and highlighting the classic dilemma of protocol fragmentation:

Stablecoin issuers are therefore not simply leveraging “the blockchain” as a neutral, universal rail. They are instead faced with a set of individual networks that are not only siloed, but also come laden with technical and social risks that any stablecoins riding on them inherit. The most notable historical example of these risks is probably Ethereum’s DAO hack – which compromised 3.6 million ETH (worth $60 million at the time) – and the subsequent blockchain hard fork orchestrated by a small set of developers and early investors, effectively reversing protocol-valid transactions (and the “code is law” ethos of the chain) by ex post centralized fiat. The record of other blockchains, meanwhile, is littered with long episodes of severely degraded performance and outages, including dozens of such incidents on Solana and Tron, and countless more across the long tail of less prominent blockchains. Going forward, the performance of any of these chains will always rest on the quality of the roadmap – which in many cases contemplates material increases in complexity over time – and each blockchain dev team’s ability to brute-force updates and patches as necessary, a dynamic that by itself seriously calls into question the ostensible “neutrality” of these rails (addressed further below). On net, this all speaks to a much more fragmented, governance-dependent, and operationally fragile foundation than the clean “money internet” framing would suggest, undermining the mainstream presentation of a unified, reliable substrate for next-generation financial infrastructure.

However, even if we were to assume the advent of frictionless bridges and flawless technical performance going forward, stablecoins would still face a much more fundamental challenge – “blockchain technology” is not the right tool for this job.

Blockchains Don’t Scale

Following decades of precedent computer science innovations, Satoshi Nakamoto invented the original “blockchain” as a purpose-built mechanism to facilitate the operation of the bitcoin network. Satoshi’s design made several specific engineering and incentive choices to solve the “double-spend problem” which had plagued prior attempts at digital currency – before bitcoin, no such currency had been able to ensure a user couldn’t spend a given digital token more than once without some kind of central, trusted clearing service overseeing all transactions. Through the use of an openly auditable ledger with a complete network transaction history constantly verified by all users, where each new “block” of transactions in the “chain” is cryptographically linked to the prior block through unforegeably costly computation tied to real-world energy use (“Proof of Work”), bitcoin brought about the world’s first digital currency with provable resistance to double-spending. Like gold or physical cash, bitcoin is a bearer asset, meaning physical possession is fully tantamount to ownership; but unlike physical cash, bitcoin has no issuer and is thus not the liability of any counterparty. These properties allow bitcoin to be stored and exchanged on a peer-to-peer basis, all without a trusted intermediary overseeing the ledger and authorizing transactions. This has proven to be an extremely robust design, but it also comes with a set of very significant trade-offs that all other blockchains necessarily inherit.

Perhaps the most fundamental such trade-off is decentralization versus scalability. To ensure the resilience of the properties that motivated bitcoin’s creation and have allowed it to accrue value – permissionless access and verification by a global network, censorship resistance, and the enforcement of its fixed supply – anyone must be able to transact on the network and audit its data without excessive barriers to entry. This means that running a local instance of bitcoin must have sufficiently lightweight memory and bandwidth requirements that any participant with consumer-grade hardware can download bitcoin’s blockchain and reliably verify the validity of newly proposed blocks. Otherwise, the network’s data and bandwidth burdens would ultimately balloon to functionally exclude the average user, inexorably trending toward centralization of block verification and thus a breakdown of the incentive balance that allows the protocol to facilitate its purpose. If the data and performance requirements are such that you need permission to use someone else’s computer (or, in practice, their highly specialized data center) to broadcast your transactions and verify your balances, you ultimately have no check on the enforcement of protocol rules. Sovereign is he who validates the blocks.

The trade-off here is that this directly leads to necessary constraints on the blocks in the chain; they can’t have too much data per block, and they must come in slowly enough to be reliably validated by low-grade hardware. The actual “right” limits on these metrics has been the subject of much debate, but the intuition is that the throughput of any blockchain that hopes to preserve permissionless participation without reliance on trusted intermediaries will cap out at some point orders of magnitude below the threshold of global transaction volume. Ergo, the properties that make a blockchain useful in the first place necessarily put significant limits on its scalability. There is nothing special about “blockchains” in the abstract that enables faster, more efficient, or more equitable exchange – in fact, the opposite is true. As Saifedean Ammous puts it:

“Bitcoin’s mechanism for establishing the authenticity and validity of the ledger is extremely complex and complicated, but it serves an explicit purpose: issuing a currency and moving value online without the need for a trusted third party. “Blockchain technology,” to the extent that such a thing exists, is not an efficient or cheap or fast way of transacting online. It is actually immensely inefficient and slow compared to centralized solutions. The only advantage that it offers is eliminating the need to trust in third-party intermediation. The only possible uses of this technology are in avenues where removing third-party intermediation is of such paramount value to end users that it justifies the increased cost and lost efficiency.” [Emphasis added]2

Say It With Me: Blockchains Don’t Scale

These inherent scaling limitations have been very apparent on all the blockchains that have attempted to serve as stablecoin substrates – even those that were ostensibly designed to be faster and more scalable than bitcoin – because with any such design, there is only so much blockspace (loosely, data capacity) available per unit of time. As a rough framing heuristic for these limits, Ethereum’s blockchain currently facilitates 20-30 transactions per second (“TPS”) on average and supports maximum throughput of ~100 TPS (though fees begin to adjust dynamically higher well in advance of that limit).3 The blockchain’s developers have plans to continue increasing this well into the hundreds, but even this is dramatically below the Visa network’s average TPS of 1,700 (with maximum capacity of 65,000+), global card networks collectively processing 25,000+ TPS, and total worldwide non-cash TPS of 50,000+.4 As a result, Ethereum’s blockchain has historically averaged $1-5 per transaction with spikes up to $50+ even for simple transfers during periods of high congestion. These figures are at best in line with and often significantly above the average per-transaction cost borne by legacy dollar payment rails, despite Ethereum supporting only a negligible fraction of the legacy system volume to which stablecoin enthusiasts aspire.5

Serious Ethereum advocates would no doubt object that most ecosystem participants already expect incremental scaling not through the main Ethereum blockchain (the Layer 1, or “L1”), but rather via so-called Layer 2 (“L2”) mechanisms, which are separate systems (e.g. “rollups”) that process transactions off-chain while anchoring to the L1.6 Essentially, these designs aggregate and execute many transactions off-chain, then periodically post a compact summary to the L1 so that anyone can reconstruct and audit the validity of the data. This “batching” can allow the cost of a single L1 transaction to be amortized across the many constituent transfers within the batch, which can enable realized per-transaction costs as low as ~$0.01 in periods of slack demand. Fundamentally, however, these systems face their own inescapable architectural limits on scalability as usage grows, most notably their “data availability” requirements: because L2s must periodically hit the L1 with their transaction batches and there is only so much L1 blockspace available, higher demand for L2 usage will eventually (and often quickly) drive correspondingly high L1 fees, which L2 providers ultimately pass on to users. This means L2s can temporarily reduce, but ultimately not eliminate, the on-chain cost and congestion that Ethereum would inevitably experience if stablecoin users attempted to transition any meaningful fraction of global transaction volume to the ecosystem.

In practice, L2 systems – which now facilitate the vast majority of total Ethereum ecosystem transactions – have helped boost average realized system-wide TPS to ~350, though the current ceiling for sustained economically meaningful throughput before fees start to rise uncomfortably is likely something less than 1,000.7 This is still orders of magnitude short of accommodating global or even just developed market volumes, particularly since organic, real-world payment flows are often much more complex and data-intensive than many flavors of crypto-native volume (interested readers can peruse Appendix B for some additional detail on these estimates). To be sure, L2s have enabled short bursts of much higher throughput, though in many cases these bursts have unsurprisingly also driven much higher L2 fees, often even exceeding L1 fees.8 Like seats on an airplane or rooms in a hotel, the price of entry can be very low and barely respond to new entrants when demand is not close to the binding capacity constraint, but the price increases nonlinearly as capacity approaches saturation. Any cost advantage versus traditional payment networks today is therefore essentially the artifact of relatively low average demand; in the long run, any sustained, material increases in transaction volume would just lead L2 end users to bid up costs to the marginal user’s next-best alternative (i.e. legacy payment rails).

There are other significant issues to consider with this scaling model, including:

• Variable Latency / UX: Due to a volatile fee market, users can easily end up stranded deep in a transaction confirmation queue, a noteworthy UX hurdle for many real-world payments flows that further undercuts the supposed efficiency gains of blockchain transactions relative to legacy rails.

• Interoperability Problems: Just as the proliferation of blockchains fragments liquidity and creates complexity at the L1 level, the growth of diverse types of L2s – which already number in the dozens today – presents additional challenges for interoperability within the Ethereum ecosystem, as users must rely on bridging services to transact among an array of L2s with varying fee mechanisms and design assumptions.

• Mass Exit: A key element of the L2 scaling model required for durably “permissionless” use of these systems is the assumption that users can always unilaterally exit to the L1 at their discretion, creating a theoretical check on the behavior of L2 operators. However, users’ ability to economically enforce such exit rights when they might most need them is quite tenuous, as any L2 operator failure or perceived compromise runs the risk of creating sudden demand for a mass exit to the L1, potentially spiking fees to the point of pricing out users with smaller balances.

• MEV: An especially thorny problem that has plagued Ethereum’s base chain for many years, Maximum Extractable Value (“MEV”) is a systemic issue that drives higher end-user costs and transaction delays in ways that can be difficult to predict and control, famously giving rise to the idea of Ethereum as a “Dark Forest.” This hurdle, which prominent Ethereum R&D organization Flashbots has called “the dominant limit to scaling blockchains” and which offers enough material for its own essay, is exacerbated by the increased complexity of multifaceted L2 interactions.

The upshot here is that, regardless of the evermore complex tricks employed, blockchain-based systems face persistent, structural scaling constraints if they seek to preserve meaningful decentralization and permissionlessness (ostensibly their key differentiator). Of course, that naturally suggests that one way to mitigate some of these issues is – you guessed it – more centralization.

Right Back Where We Started

You might, for example, rely on yet another layer to clear many more transactions via explicitly trusted custodial platforms and / or payment service providers (“PSPs”) that run their own internal ledgers and highly specialized operations to intermediate user interactions while anchoring periodically to the L1 and L2s. In other words, you could solve these problems by recreating banks (just with more steps, less network effect, and no lender of last resort). Perhaps not surprisingly, this is broadly how the Ethereum ecosystem has trended, with a significant share of user activity depending in some way on custodial platforms and / or trusted intermediaries like exchanges, RPC providers, and PSPs that sit on top of L2s – which are highly centralized themselves due to capital intensity and operational overhead, with the most popular iterations running on unilaterally controlled servers.9 This improves scale and abstracts away complexity, but in exchange for diminished user recourse to the “permissionless” blockchain.10 Even in the case of something like MetaMask, the most popular Ethereum wallet which allows users to hold private keys locally, most users in practice depend on third-party infrastructure like Infura (which is notably owned by the same parent company as MetaMask) to actually submit transactions and query balances.11

From a user perspective, this shift can offer experiences that look like the familiar UX of legacy payments, but only by reintroducing the same unsecured credit exposures and institutional dependencies that enable legacy payment rails. Custodial wallets and PSPs (typically large exchanges like Coinbase and Binance or fintech custodians like PayPal) maintain their own internal ledgers of user balances which they debit and credit instantly based on transaction flows, while only reflecting the net results periodically on L1s and L2s. These arrangements open up capacity for orders of magnitude more batching while giving users fast payments, but at the cost of significant abstraction from the settlement assurances of the L1 blockchain. Effectively, users are at least depending on the permission and technical efficacy of these third parties to facilitate their transactions, and are often just transacting directly with unsecured claims on the intermediaries, the ultimate value and utility of which will depend on the solvency, ideological neutrality, risk controls, technical resilience, and goodwill of any given custodian or PSP. Beyond outright custodial relationships, the emergence of corporate middleware like Circle’s CCTP – particularly its Fast Transfer feature, which offers fee-based accelerated cross-chain transfers through Circle-controlled infrastructure – illustrates the same drift toward managed service layers that improve speed and convenience in exchange for greater trusted intermediation.

In any case, the Ethereum scaling roadmap increasingly relies on even more of this type of intermediation over time. Similarly, Solana has embraced the same scaling trade-offs even more directly, pursuing a single very high-throughput L1 with a concentrated, professional validator set that even now requires high ongoing capital commitments along with professional-grade hardware and bandwidth.12 These dynamics have pushed the number of active Solana validators steadily lower over time, and the project’s roadmap aims to continue pushing L1 capacity and technical requirements higher, even as more of the user-facing experience is delivered through platform-mediated wallets and managed service layers. Tron goes even further, building on a design of just 27 so-called “Super Representatives” that have sole discretion over processing transactions to optimize for maximum throughput from exchanges, OTC desks, and custodial wallets. Across all three dominant stablecoin ecosystems, the modal user experience is clearly converging on the same pattern: most users rely on trusted intermediaries to deliver the familiar quick payments UX of legacy systems, while those intermediaries in turn settle batched net positions as necessary on the L1s.

These kinds of highly intermediated arrangements will tend to reintroduce the potential for (intentional or unintentional) “rugpulls” of users, as well as renewed surface area for censorship, de-banking, and unequal access comparable to the legacy system. Even if all of that could be avoided, in the long run these intermediaries still won’t be able to sidestep the same kinds of upward fee pressures we’ve described elsewhere if transaction demand truly rises toward global payments scale, as the same basic on-chain constraints will eventually apply whenever L1 blockspace is persistently saturated.

But notice that even if all those conditions could be perfectly optimized by trusted third parties, such a system would likely still recreate a meaningful intermediary cost burden. An imperfect but instructive analog might be the Merchant Discount Rate (MDR) in legacy card payments, which builds in a per-swipe cost bundle that includes (among other things) the economics of fronting funds for instant authorization and managing fraud / disputes, as well as other operational functions like compliance. Assuming this hypothetical intermediated stablecoin stack aimed to preserve many of these features at scale – near-instant authorization UX (even if / when L1 and L2 rails become congested); allowance for disputes; unavoidable regulatory functions – the intermediaries would still need to perform (and be compensated for) many of the same functions intermediaries perform today, just on a different technical architecture. The overall systemic cost would therefore just be transmuted rather than eliminated, again undercutting the promise of “blockchain rails” as an inherently cheaper way to do business in practice.

Better Banking Through Chemistry

Even if a stablecoin enthusiast granted that blockchains do carry frictions and trade-offs that will limit permissionless access at scale, and that these trade-offs are likely to drive much more intermediation if stablecoins continue to gain adoption, he might still argue that the technical foundations of these systems can drive major upgrades to the existing intermediated banking and payments stack. Legacy financial rails could no doubt benefit from more innovation, and our stablecoin interlocutor might assert that by offering bearer asset transactions available 24x7x365 on programmable, interoperable substrates, blockchain-based systems can drive upgrades to traditional rails including better UX, faster and more efficient interbank settlement, and improved cross-border payment flows. However, across all those dimensions, public blockchains are at best an unnecessary complication and at worst a net drag relative to what can already be done more efficiently with some version of a traditional database. Let’s look at each component of this argument in turn.

Some Background: Databases vs Blockchains

At the highest level, a database is a system for storing and updating shared state (i.e. records that multiple parties need to access and update) where a designated operator or tightly governed consortium maintains the canonical data set and authorizes proposed changes (e.g. an HR system of record, a bank’s deposit ledger, etc). Among several key differences between blockchains and traditional databases is the latter’s lack of consensus and replication across potentially adversarial parties. Unlike blockchains, databases can update and maintain state without needing an arbitrarily large set of unaffiliated and potentially adversarial parties to validate proposed changes, and without requiring such parties to replicate and persistently store the latest updates. Once a centralized intermediary is assumed – and per the discussion up to this point, blockchain-based systems prioritizing throughput and UX will inexorably trend in that direction – “moving” a digital balance from one party to another (even billions of times a day) is a trivial computational action whose efficiency would only be weighed down by unbounded external validation and replication.13

As a result, blockchains will tend to carry at least as much – and in practice, significantly more – computational and coordination overhead, degrading their technical throughput and cost-effectiveness relative to conventional databases.14 Even Solana, Tron, and other blockchains that explicitly deemphasize decentralization in favor of boosting throughput still ultimately confront a variety of fundamental challenges that limit their functionality relative to traditional databases, including: safe propagation of blocks; rapid state growth; MEV; and ultimately the same long-term fee pressure that is inevitable when a high volume of time-sensitive demand meets finite blockspace (see Appendix B for more detail on all these points).

This structural edge in database efficiency is visible both in the shift toward increasingly centralized validator sets and database-like intermediaries across much of crypto, as well as the UX already available to most users of traditional fiat payment systems in developed markets. As of early 2026, essentially all such users have access to some form of fast, easy digital payments either directly through banking apps or via platforms like Venmo, Zelle, and CashApp, which rely on simple, instant debits and credits to internal ledgers powered by conventional databases. These systems certainly have limitations and edge cases (which we’ll discuss more below), but for the average bank account holder willing to accept the risks of intermediation in exchange for convenience, stablecoins offer no inherent UX advantage over conventional databases for typical daily payments.

This is the fundamental headwind that any blockchain-based stablecoin must account for: in a world where we’re assuming continued intermediation and trusted third parties, why not just use a database?

Bearer Assets

The stablecoin enthusiast could start by objecting that, while databases may indeed be structurally more efficient on a simple per-transaction basis, blockchains offer users bearer assets (as discussed earlier, assets that can be held and used without counterparty authorization) on open networks, which are fundamentally different from claims on a closed, permissioned database like a bank ledger. Because a stablecoin transfer ostensibly constitutes the movement of an asset in itself (comparable to paying in physical cash) rather than a message to update a bank ledger (e.g. a check or wire transfer), it removes settlement risk from the equation. In the legacy paradigm, every end-user payment is really a promise for final settlement – the point at which a transaction is irrevocably complete in the ultimate settlement asset (e.g. central bank money) – that requires subsequent reconciliation, giving rise to “in-flight” credit risk and the MDR burden we mentioned earlier. But in the stablecoin paradigm, so the argument goes, the transfer is the final settlement. Therefore, even if the future is still dominated by centralized intermediaries (whether blockchain-adopting banks or totally new types of crypto-native institutions), blockchain-based stablecoins as bearer assets still provide superior backend movement of funds.

Stablecoins do have some bearer qualities: users can directly hold the private keys necessary to spend them, and in principle they can (usually) be spent without issuer authorization or involvement (though in practice, many users opt for the convenience of custodial tools rather than taking advantage of these attributes). However, stablecoins are ultimately permissioned claims on a counterparty’s reserves, and therefore lack some key characteristics that would make them truly bearer assets. Even if all of the previously discussed centralizing forces that plague blockchain ecosystems could be totally solved (no doubt a heroic assumption), individual and institutional stablecoin users would still be transacting with tokens that have at least three layers of inescapable counterparty risk: their issuers, the banks that custody those issuers’ fiat collateral, and the US government.

Unlike gold, bitcoin, or (arguably) physical cash,15 a stablecoin is someone else’s liability. A stablecoin “balance” is really just an entry in an issuer’s privately administered database, and therefore is always subject to unilateral suspension or seizure by that issuer. Through straightforward smart contract capabilities natively available to the blockchains that facilitate USDT and USDC transactions, these issuers can instantly blacklist addresses at the touch of a button, indefinitely preventing those addresses from sending their stablecoin tokens to a peer, a “DeFi” protocol, a regulated exchange, or anywhere else. These tokens can also be “burned” and reissued elsewhere entirely at the discretion of the issuer. Examples of these types of actions are numerous, encompassing thousands of addresses worth billions of dollars over just the past few years – including the very recent freeze of wallets linked to the deposed Maduro government in Venezuela – and both Tether and Circle actively promote their collaboration with law enforcement to immobilize funds as necessary. Theoretically, actually exercising these powers is more difficult if an issuer does not have sufficient “Know Your Customer” (KYC) information to isolate the tokens of a targeted user, but in practice most users are interacting with stablecoins through platforms that require KYC, and we expect surveillance of these systems to increase over time (more on this below).

Even more fundamentally, the value of these tokens depends upon access to and the continued solvency of the regulated US banking system. The starkest illustration of this dependency was the massive 2023 bank run that brought down Silicon Valley Bank, which nearly vaporized over $3 billion in Circle reserves held at SVB, potentially destroying USDC’s dollar peg if not for unprecedented intervention by the Federal Reserve. But even in less chaotic scenarios, these issuers are always subject to the permission of the banks and custodians holding the collateral that makes their tokens possible, and these institutions can in principle gate redemptions between stablecoins and fiat reserves at will. It’s important to realize here that there is no way for stablecoin issuers (or anyone else) to “self-custody” dollars or near-equivalents like Treasury bills at scale; interacting with true dollar-based collateral always requires a licensed and regulated intermediary, a reality whose drawbacks will be uncomfortably familiar to anyone who lived through the coordinated de-banking era of “Operation Chokepoint 2.0.”

The counterparty stack goes one level deeper still. The Federal Reserve and US Treasury, the issuers of the actual bedrock assets that make the whole system work, always retain final, unilateral control over the accessibility of those assets. While it may be a rare occurrence for these government agencies to adversarially flex that power, their decision to freeze $300 billion of Russian central bank reserves in 2022 was a clear message to the world that no one, not even sovereign nations, can ultimately have full bearer control over assets in this system.

Because stablecoin issuers cannot hold dollar or Treasury reserves “outside” the legacy banking and custody system, and those assets would still be subject to governmental seizure or cancellation even if they could, stablecoins are effectively just a wrapper for underlying claims on the legacy dollar system, or bank liabilities with extra steps. The most obvious result is that, contrary to much marketing hype, there is a hard limit on the bearer properties of stablecoins for individual use: they can be held in self-custody, but – in stark contrast to bearer assets like gold, bitcoin, or physical cash – their usability ultimately remains revocable via issuer controls and regulated chokepoints. This same reality also has significant implications for claims about stablecoins’ superior interbank settlement capabilities that we will address further below.

24x7 Availability

Though stablecoins may not be bearer assets in the fullest sense, an advocate might still argue that they benefit from transactions facilitated through the persistent, always-on rail of a blockchain. Whereas legacy financial systems are gated by traditional business hours, which constitute only ~25% of total hours in a year, blockchains run 24x7x365 and can therefore offer institutions materially smoother, faster transfers and much greater surface area for commerce.

But putting aside the long history of blockchain outages and downtime we mentioned earlier, blockchains don’t actually offer any unique uptime improvements relative to traditional database-like systems. It’s absolutely true that traditional systems have generally been ringfenced by business hours, but the last decade has seen the emergence of many highly performant systems offering true 24x7x365 final settlement of tens of trillions in annual volume, including the Federal Reserve’s FedNow, The Clearing House’s Real Time Payments (“RTP”) network, and various systems abroad including Pix in Brazil, RT1 and TIPS in Europe, and FPS in the UK.16 These always-on networks provide instant settlement of both consumer-grade payments and larger transfers worth millions of dollars, with the maximum limit headed higher over time. Even Fedwire, the Fed’s century-old real-time gross settlement (“RTGS”) system which facilitates over $1 quadrillion per year of instant final settlement for large interbank transfers, already operates on a “22x5” (22 hours, 5 days per week) schedule and is laying the groundwork for 24x7 availability.

Meanwhile, adoption is growing rapidly, with near-universal instant payments coverage in the UK and Europe, and 80% of US banks expected to support receiving instant payments by 2028.17 Crucially, because these networks do not have to contend with scarce blockspace or data availability budgets – which will always exist somewhere in a blockchain-based payments stack – and their state updates (i.e. transactions) amount to proprietary database changes that do not require global consensus and replication, they benefit from near-zero marginal transaction costs that do not meaningfully scale with transaction demand, unlike blockchains. While far from perfect, the rapid growth of these database-oriented systems illustrates that there is nothing about blockchains as such that uniquely enables always-on instant settlement. Ultimately, 24x7 availability is a policy question, not a technical one, and it can be readily and more efficiently accommodated with traditional database technology.

Programmability

Another key feature stablecoin advocates may tout is programmability, or a stablecoin token’s capacity to express complex, composable transaction logic that can be tailored to many different situations. Through blockchain-based smart contracts, stablecoins can potentially facilitate consumer use cases like programmatically split payments (e.g. for multi-party revenue sharing) or institutional applications like automated treasury management and sophisticated multi-asset settlement processes.

While we won’t address every possible application here, the first key intuition to highlight is that, just like with 24x7 liveliness, programmability is not a unique feature of blockchains, but is common to any software (e.g. a sophisticated database) that can automatically execute commands based on conditional logic. In fact, a wide variety of financial applications leveraging the programmable capabilities of high-powered databases have already been deployed in the wild, including:18

We could list many more, but the upshot should be clear: you don’t need global consensus to execute a conditional payment. Granular programmability of financial interaction has been available for decades, is getting more sophisticated over time, and does not depend on the use of a blockchain.

Furthermore, it’s not obvious that the programmability blockchains offer is even really desirable for deployment in many commercial environments. First off, any system attempting to leverage blockchains for these kinds of use cases faces the key cost-efficiency dilemma we outlined above: the marginal cost of executing any of this logic through a standard SQL database script is near-zero, whereas the per-use cost of running the same operation on a blockchain is structurally orders of magnitude higher even before considering the long-term upward fee pressure we’ve discussed. Just as importantly, blockchains’ programmable features are made possible through a delicate balance of code and incentives that adds wide surface area for edge case smart contract failure resulting in permanent loss of funds. This complexity has driven billions in losses through purely technical failures or exploits over the last several years, and that’s before even considering the impact of dynamics like MEV. Whereas the programmable transactions enabled by modern databases both sidestep all this complexity and preserve reversibility in case of error, the “programmability” that blockchain advocates promote – particularly when coupled with the irreversibility that is supposedly a selling point for blockchains – often masks a degree of technical brittleness inappropriate for high-volume global commerce and / or sensitive corporate functions like treasury management.

Interoperability

Perhaps the most compelling proposed attribute of stablecoins is the potential for greater interoperability relative to existing rails: a single, open-source standard for value transfer that replaces the fragmented landscape of legacy banking APIs. Advocates like a16z’s Chris Dixon argue that in the current system, financial innovation is stifled by gated infrastructure – to build a fintech app, a company must slowly work out individual business development deals and integrate with bespoke, proprietary bank ledgers. In the blockchain paradigm, however, the financial rail is public infrastructure. Just as a developer or company can freely “plug into” the unified open standards of the internet for information transfer, they can now plug into open standards like Ethereum’s ERC-20 for money transfer. Similarly, Circle’s Jeremy Allaire envisions this as an “Economic Operating System,” where “internet-native protocols” standardize global settlement the way SMTP standardized email. Banks, financial institutions, and companies in general can “Integrate Once” with a blockchain, instantly connecting them to the entire global economy.

This vision of a unified banking backend built on blockchains is unfortunately riddled with issues and questionable assumptions. In the first place, as with 24x7 availability, shared standards are ultimately just a question of policy and coordination, not a unique property of blockchains. The legacy banking industry has already made real strides toward interoperability through new protocols like ISO 20022, a common messaging standard recently adopted by SWIFT, Fedwire, and CHIPS. This standard unifies inter-institution payment communication without the overhead of a decentralized consensus mechanism and is now used in more than 90% of high-value global payments. Brazil’s Pix system – broadly adopted in the country in just three years – takes this even further, offering domestic financial institutions and individuals a unified “shared state” with standardized rules to which they can interoperably connect. After first connecting with Pix, any individual or institution in Brazil is instantly reachable by any other bank account in the country without any bespoke bilateral integrations, effectively fulfilling the slick “integrate once” vision promoted by the stablecoin industry. Crucially, all this is facilitated directly by Brazil’s central bank with traditional database infrastructure, the diametric opposite of the approach advocated by most stablecoin promoters. This no doubt hands over more control to the central bank, but as we discussed earlier, fiat stablecoins built on central bank collateral don’t fix that; they just add even more layers of counterparty risk and technical overhead.

That said, while Pix was rolled out quickly, wholesale industry cutovers like these can take time, and ISO 20022 was famously delayed in its broad implementation, so a stablecoin advocate could argue that plugging into a public blockchain allows banks, fintechs, and corporations to sidestep potentially long rollout periods they can’t control and just start working on a shared standard right away. However, as discussed elsewhere, the claim that blockchain-based stablecoins offer a “single standard” is misleading at best, as the blockchain landscape is arguably even more fragmented than the banking system that advocates seek to replace. “Integrating once” is impossible in an environment where liquidity is splintered across dozens of incompatible Layer 1 blockchains and Layer 2 rollups, each requiring its own bridge infrastructure and security assumptions. Furthermore, stablecoin standards themselves are not universal, as a USDT token on Ethereum is legally and technically distinct from a USDT token on Solana, and smart contract implementations vary wildly in their upgradability and risk parameters. The result is just a fractal of new silos rather than a unified rail.

But even if we grant the possibility of a single blockchain standard, the “Universal Rail” thesis fails because it ignores the legal and operational reality of banking. For one thing, blockchain tokens are relatively data-poor by design. While the ISO 20022 standard carries rich metadata needed to facilitate complex institutional finance (invoice numbers, tax codes, remittance details, and 800+ other fields), an ERC-20 token transfer by itself carries only the barest “To, From, and Amount” data. To make these tokens useful for business, institutions would either need to leverage complex on-chain smart contracts, which reintroduces the problem of standardization (there is no universally accepted, ISO-equivalent standard for blockchain payment metadata); adds new privacy concerns around sensitive business details that would need to be disclosed on-chain (e.g. pricing, payment terms, etc); and significantly increases the cost of using these tokens relative to the near-zero marginal cost of ISO 20022 messaging (see Appendix B for more detail). More realistically, institutions would likely just build off-chain indexing layers to re-attach and handle this context, but this also clearly cuts against the ostensible cost, simplicity, and coordination advantages of the interoperable rail.

On an even more basic level, a shared blockchain does not replace the need for internal reconciliation, but rather multiplies it. Banks are legally and commercially required to maintain their own internal ledgers – which map ultimately to “base layer” central bank money – as the definitive source of truth for operations, regulatory reporting, and risk management. Adopting a blockchain does not delete these private books; it merely adds a new layer (effectively a shadow ledger) that must be constantly synchronized with them. Rather than simplifying the stack, this creates a permanent reconciliation tax where institutions must manage a more complex system with a new set of accounting entries, forcing them to bridge the gap between their legally binding internal records and a slower, more expensive, and technically brittle source of truth. As long as central bank money remains the ultimate, bedrock base layer of the system – and commercial banks the first-tier intermediator of that substrate – blockchains are net additive to the system’s complexity.

All of this brings us to a fundamental point: with blockchain-based stablecoins, the map is not the territory. Unlike true final-settlement systems such as Fedwire or bitcoin, both of which have their own native, endogenous settlement units that make no reference to anything external to the system (central bank money for Fedwire, sats for the bitcoin network), a blockchain-based stablecoin depends on reference to assets — as well as custody, redemption, and legal mechanics — that exist outside the settlement rail on which it moves. These tokens may offer a useful “map” of the dollar system in some contexts, but absent the Federal Reserve and US Treasury replacing their settlement and collateral infrastructure with a blockchain, they can never be the “territory” of the dollar itself, only an extra representational layer on top of it.

Better Interbank Settlement?

Having delved into the key attributes that supposedly make blockchain-based stablecoins attractive, we can reason through some of the key ways stablecoins are supposed to upgrade legacy interbank settlement:

Given these structural limitations, it is unsurprising that the much-touted “institutional adoption” of stablecoins has largely avoided the public blockchain vision entirely. Instead, projects like JPM Coin or Citi’s Regulated Liability Network are effectively private walled gardens: databases that are nominally “distributed” but are controlled by a single entity or consortium, indistinguishable in practice from a reskinned version of the existing banking system. Even pilots that technically utilize public chains like BlackRock’s BUIDL are so heavily permissioned and whitelisted that they function more as intranets than open financial networks. While advocates may retreat to theoretical use cases like “Atomic DvP” or “Collateral Mobility” to justify the technology, these rely on the widespread existence of tokenized securities (“Real-World Assets”) which do not exist at commercial scale today. Even if they did, all the previously discussed constraints and trade-offs mean that these use cases would at most support tightly governed institutional ledgers for narrowly defined workflows, not public blockchains as open global payment rails.

Upgraded Cross-Border Flows?

While domestic banking may see little to no benefit from blockchains, advocates may argue that blockchain-based stablecoins can totally rearchitect cross-border flows by eliminating the chain of correspondent banks that add friction and fees to every international payment. In the legacy model, sending money from a local bank in the United States to a supplier in another country involves a chain of 3-5 banks and intermediaries:

Each “hop” in this chain adds delays, opacity, and settlement risk. The most notorious danger in this system is “Herstatt Risk,” or the possibility that one party in a cross-border payment fails after receiving funds but before paying out its leg of the transaction, leaving counterparties exposed to losses. Stablecoin proponents argue that a blockchain can solve this issue by “teleporting” value directly from sender to receiver, achieving near-instant final settlement that eliminates these hops and risks outright. There are a few ways that this structure could play out, but on closer inspection, each relies on assumptions that struggle under real-world constraints at scale.

The smoothest version of this upgraded flow effectively assumes a dollar stablecoin “circular economy” where the Sender and Receiver are both able to freely use the stablecoin for anything. In this vision, a supplier in a non-dollar jurisdiction can simply stay in USDT or USDC for their local spending needs, allowing for a frictionless “teleportation” flow: USDC Sender → Blockchain → USDC Receiver. However, while the US government may want to use stablecoins to spread dollar hegemony (we’ll address this more below), the world is not close to fully dollarized. Realistically, the vast majority of users in international markets cannot live natively on a dollar standard; they must convert to local fiat to pay taxes, living expenses, wages, etc. This dynamic immediately reintroduces at least one intermediated step back into the mix: USDC Sender → Blockchain → USDC Receiver → Local Bank/Exchange for conversion. If the sender also starts in a non-dollar currency, a conversion step is required on the front end as well. Once you add these converting exchanges and market makers into the mix, you begin to reintroduce the same settlement risks, credit exposures, and delays the system was supposed to eliminate.

To avoid reintroducing such intermediaries, you would need to see the rapid dollarization of many global economies, a phenomenon local governments will likely be both eager and able to limit given, as we established earlier, the vast majority of stablecoin flows are facilitated by centralized intermediaries. However, if we grant that demand for dollar exposure in unstable regimes is high and that users will find ways to adapt, we must ask: what would a scaled version of this flow actually look like in practice?

To the extent a “dollarize the world with stablecoins” strategy works, it will inevitably be highly regulated and surveilled at both endpoints. There is no scenario where the U.S. government allows trillions in “permissionless” dollar-based flows in and out of the country to unidentified actors. Because these tokens explicitly depend upon access to permissioned central bank and Treasury collateral, the U.S. government will have all the leverage it needs to enforce full KYC and whitelist/blacklist controls via issuers and their regulated partners (collectively, Virtual Asset Service Providers, or “VASPs”). The resulting flow would therefore look something like: USDC Sender → Regulated VASP A → Blockchain → Regulated VASP B → USDC Receiver. This essentially recreates the old correspondent flow, just with a different set of actors. Crucially, this will tend to encourage just as much international fragmentation as currently exists under SWIFT; large swaths of the global economy (e.g., adversarial nations like China, Russia, or Iran) will almost certainly be ineligible to join this emergent “VASP network,” leaving the geopolitical silos of the legacy system intact.

An advocate might object that, even if you end up with a similar intermediated flow, this arrangement is still preferable to the status quo because it substitutes instant final settlement (once a VASP broadcasts to the blockchain) for the much longer settlement windows of the legacy system, solving the Herstatt Risk mentioned earlier. However, the legacy banking system effectively already solved this risk decades ago without blockchains. Following the 1974 collapse of Bankhaus Herstatt – the source of a systemic panic which gave rise to the term – the industry eventually established Continuous Linked Settlement (CLS) in 2002. CLS enables “Payment-versus-Payment” (PvP) settlement, ensuring that both legs of a currency trade either settle simultaneously or not at all, thereby eliminating principal risk (crypto-native readers may know this concept as “atomicity”). CLS now settles over $7 trillion daily with same-day finality in zero-risk, “base layer” central bank money, all without the scaling challenges and technical risks of a blockchain.

While CLS is not technically “instant” (all transactions settle same-day, but within a ~5 hour window), that’s ultimately a function of its netting architecture; if you want true “instant” final settlement, you have to move to a gross settlement model. This brings us to the final key trade-off for the type of system under consideration: capital efficiency. Legacy systems like CLS utilize multilateral netting, where banks only need to settle the net difference between their incoming and outgoing payments. This reduces liquidity requirements by over 95%, allowing trillions in value to move with relatively little trapped capital.19 Meanwhile, as we’ve discussed, blockchains operate on a gross settlement system: every transaction must be fully pre-funded. If a VASP wants to send $1 million in USDC across borders “instantly” on-chain, they must have the full $1 million USDC on hand immediately to effect the transaction. To replicate global trade volumes with blockchains, VASPs or similar intermediaries (the new “correspondent banks”) would have to lock up massive amounts of capital in pre-funded wallets across fragmented chains and exchanges. This working capital burden is effectively a new wholesale system cost that replaces the old SWIFT / CLI fees – at many multiples of the legacy system cost20 – and it will either be passed on to end-users or encourage a return to more capital-efficient off-chain netting, neutralizing one of the ostensible key benefits of using the blockchain in the first place.

Finally, even if we assume intermediaries are willing to bear this capital cost (or that users are willing to subsidize it), we run into the final fundamental issue: as with the other use cases we’ve discussed, you simply don’t need a blockchain for this. This is perfectly illustrated by the emergence of the Circle Payments Network (CPN), Circle’s purpose-built solution for cross-border flows. This overlay has enabled a variety of positive case studies advocates might cite as evidence that stablecoins are already improving cross-border flows in the wild, including Alfred’s local BRL payouts via Pix, Tazapay’s local-currency bank deposits in Asia, and Conduit’s use of CPN to accelerate multi-corridor routing. However, the common pattern across these examples is not the unique and indispensable advantages of a public blockchain rail, but rather the managed service layers coordinated by Circle and similar operators to handle compliance, FX, business logic, and local banking integrations. Case studies like these may reflect genuine improvements in these specific corridors relative to the status quo, but in practice they work mainly by wrapping stablecoins around existing domestic rails and institutional infrastructure rather than sidestepping them with a disintermediated public blockchain.

While CPN technically broadcasts transactions on blockchains today, it is structurally a system of internal transfers orchestrated by Circle, with transactions executed by whitelisted participants under Circle’s rules, conditions that dilute the benefits of a blockchain in the first place. As long as Circle has ultimate control over participation in the network and transaction finality, there is no technical reason that transferring USDC claims between whitelisted CPN participants would be faster, cheaper, or more reliable on a public blockchain than on a private, Circle-managed SQL database, especially at the long-term volumes advocates expect. We’ll discuss this more below, but as issuers like Circle move closer to this closed-loop model to solve for speed and compliance, they inadvertently prove the thesis: the “upgrade” stablecoins might offer here is not fundamentally the result of a blockchain rail.

A Ledger Is All You Need

Netting it out, we now have a pretty comprehensive case that the much-promoted vision for blockchain-based stablecoins suffers from serious scaling limitations and misguided design assumptions. But all this still leaves us with a key unanswered question: if the current incarnation of stablecoins is so unsound, how have stablecoins grown to account for – as many headlines suggest – volumes that rival major card networks? If the architecture has so many limitations, why have stablecoins apparently achieved such clear product-market fit?

In the first place, it’s important to consider some context underpinning claims about stablecoins’ volume. Headlines touting volume already eclipsing Visa are often severely distorted by flows like bot activity, internal exchange transfers, and automated trading strategies that don’t look anything like traditional retail payments or institutional settlement. Crucially, these types of flows (e.g. a single bot spamming thousands of tiny identical trades to a single smart contract) tend to be much more homogeneous and optimizable than real-world retail payments with more heterogeneous characteristics, making them far easier to scale.21 When adjusting for confounds like these, data provided by Visa and analytics firm Allium Labs show that only 10-20% of total on-chain stablecoin volume reflects organic economic transfers comparable to real-world payment and settlement flows, with retail-sized flows comprising a negligible portion of total activity by both volume and transaction count. Meanwhile, the effective realized “TPS” for organic payments is something like 50-100 across all public chains over the past year (as opposed to 50,000+ for legacy networks built on databases).

But even leaving those nuances aside, it’s clear that stablecoin use has grown substantially and impressively over the last five years, with the total stablecoin market cap ballooning from just ~$10 billion in 2020 to as high as ~$300 billion by the end of 2025. Despite all the limitations of blockchains and compromises required to make these systems work, there is obviously organic demand to use dollar stablecoins, especially in markets outside the US where stablecoin uptake is growing rapidly. Stablecoin advocates could concede all the arguments we’ve made so far, but then fairly point to this growing usage as a sign that we’re missing the forest for the trees: the demonstrable fact is that the US dollar, for all its faults, is the cleanest of the dirty fiat shirts, and virtually every international user would prefer it over his local, inferior government currency. As a result, they might say, it’s misguided to compare stablecoins to legacy banking rails, as the key target demographic of emerging market users have historically had limited access to that system anyway. Rather, we should acknowledge that stablecoins represent a novel, step-function improvement in such users’ access to the dollar system, and furthermore we should recognize that ongoing demand for US dollar exposure will likely support significant growth of global stablecoin use over time.

We’re sympathetic to much of this thinking, and as we acknowledged upfront, the potential benefits of this trend are not lost on key officials like Treasury Secretary Scott Bessent. Of course, it’s worth asking whether the total balance sheet capacity of this cohort of emerging markets users – perhaps ~$5 trillion in cash-like wealth that could be readily dollarized22 – is really significant enough to meaningfully defease the US government’s bloated and growing debt burden. Moreover, the recent pace of uptake has been insufficient for the task at hand, as stablecoins have only added ~$100 billion in market cap since the Trump administration returned to office; impressive, but a drop in the bucket relative to the $2 trillion of incremental capacity the Treasury is ostensibly targeting over the next several years (particularly since stablecoins outstanding have gone the wrong way since October 2025’s crypto crash).

But either way, notice that in this framework, the true essence of what stablecoin users value is access to synthetic dollar claims, not decentralized consensus (or technical theater gesturing in that direction). Users want low-friction digital tokens that give them the ability to make dollar-denominated transactions with a unit also used and accepted by those they would be likely to pay (e.g. peers, local merchants, employees, etc). As we’ve shown up to this point, nothing about that use case implies or benefits from the facilitation of a blockchain: all that’s needed is a highly performant digital ledger with a sufficiently large network effect to support broad spending capabilities. The growing product-market fit of stablecoins fundamentally comes from participation in digital dollar ledgers maintained by specific credible issuers, not from “blockchain technology.”

To the extent that US financial regulators don’t want to encourage this product-market fit – as was very clearly the case during the last Presidential administration – they could neuter the entire ecosystem overnight given, as discussed, these tokens are entirely dependent upon access to regulated US dollar collateral. On the flipside, if US officials are hoping to encourage uptake of stablecoins to spread dollar hegemony – which seems to be the case for the moment given the recent passage of the GENIUS Act – public blockchains are neither necessary nor optimal to accomplish that goal. Indeed, that legislation, hailed as a landmark bill by many in the stablecoin industry, carves out no special role for and does not mandate reliance on incumbent public blockchains.23 The bill defines stablecoins not by their technological architecture, but simply by their function: digital assets redeemable at par and backed 1:1 by high-quality liquid collateral like US Treasuries. “Blockchain technology” as commonly understood is incidental to the operation of both “grey market” and GENIUS-compliant stablecoins, and all the incentives skew toward the ultimate abandonment of public blockchains for this use case.

Drop the Blockchain; It’s Cleaner

If the future of the digital dollar does not depend on public blockchains, what might it ultimately look like? Here we admittedly drift into the realm of the speculative, but fortunately, several recent updates from the key players in the space offer some significant clues as to the direction of travel.

The most obvious signal is the industry’s recent embrace of private, proprietary infrastructure. In the past year, both Circle and fintech giant Stripe have announced their own permissioned blockchains (called Arc and Tempo, respectively), both of which rely on a closed consortium of approved institutional validators to facilitate transactions. While these systems are billed as “blockchains,” their recordkeeping and state change updates depend on Byzantine Fault-Tolerant consensus engines shared among a small group of whitelisted actors to maintain coordination, a design choice that effectively mirrors a conventional distributed database, discarding the global, adversarial validation of public blockchains in favor of speed and control.24 Meanwhile, though both systems are compatible with the “Ethereum Virtual Machine” (EVM) and can interoperate with the Ethereum ecosystem, both also rely on stablecoins paid to each system’s consortium for transaction fees (rather than native blockchain tokens like ETH or SOL paid to Ethereum / Solana validators), moving value capture away from public blockchain infrastructure and toward the operators of these closed systems.

These new private “blockchains” are clearly laying the groundwork for greater vertical integration around the stablecoin payments use case – Arc natively integrates with the previously mentioned Circle Payments Network, while Tempo is specifically optimized for fast payments that plug into Stripe’s emerging closed loop stack that leverages its recent acquisitions Privy and Bridge – shifting these players further away from dependency on public blockchain uptime, congestion, roadmaps, and fees. Over the long run, we would expect even the “blockchain” branding of these private systems to be dropped. As we’ve seen throughout this essay, once a system is governed by a central operator or permissioned consortium, it is functionally indistinguishable from a walled garden database, and any invocation of a blockchain amounts to, as crypto analyst Omid Malekan puts it, a dictator holding “elections” where he is the only candidate.

Though leading stablecoin issuer Tether has not announced its own proprietary blockchain, its recent actions suggest a similar trajectory toward vertical integration that can ultimately reduce dependence on public blockchains. Last year, Tether launched Wallet Development Kit (WDK), an open source software toolkit designed to allow app developers and ecosystem participants to build and use cryptocurrency wallets supporting USDT easily. It’s still very early, but this rollout could present a phase shift in Tether’s relationship to its users: until now, Tether has left all UX choices in the hands of third-party developers and blockchain ecosystems, never directly touching real-world applications (except to freeze funds when necessary). By contrast, WDK embeds Tether in a direct relationship with its end users, and its toolkit puts in place the critical primitives Tether would need to begin controlling much more of the stablecoin payments stack from the edges.

More specifically, WDK leverages the concept of “Account Abstraction” to separate a user’s account and experience from the underlying mechanism of transaction facilitation and fee payment. Echoing the choices of Arc and Tempo, this allows users to pay transaction fees in tokens (e.g. USDT) not native to an underlying blockchain, enabling “gasless transactions” from a user perspective and opening up a smoother, more predictable payment UX. WDK also includes support for “Paymasters,” or third parties (Tether or its partners) that actually handle and can freely subsidize the underlying fees paid to blockchain operators. The architecture is designed to be ecosystem-agnostic, with support for a wide variety of transfer rails including Bitcoin, Ethereum, Tron, Solana, and even the Lightning Network, with WDK providing the dynamic routing logic to determine the best means of facilitating any given payment. Developers build against the WDK API (rather than any particular blockchain SDK), giving Tether control over how funds sent from WDK-based endpoints are ultimately transferred.

Collectively, this architecture totally abstracts the payment rail from both users and developers. For now, this all plays nicely with the major existing ecosystems, and transactions will still be facilitated on public blockchains (which also means that, even if users are paying fees in USDT, blockchain gas fees are eventually being paid to validators by someone in the flow). But it sets in motion a future where, in a world of many WDK-based endpoints, Tether could easily introduce “WDK-to-WDK” payments, whereby if User A and User B are both using WDK-based wallets, any transfers between them happen instantly and for near-zero cost. Instead of finding the cheapest transfer option across an array of public blockchains and paying gas to external validators, the WDK toolkit could just trigger a simple, instant database update to Tether’s master ledger (or some kind of overlay network controlled by Tether). In this scenario, public blockchains would be gradually demoted from core settlement rails to vestigial plumbing that can be swapped out or ultimately bypassed at will as more economic throughput occurs on Tether’s optimized, proprietary stack.

To be sure, there’s no guarantee WDK will gain enough traction to support such a shift toward material vertical integration for Tether, as the history of open source software is littered with SDK projects that achieved minimal real-world traction. However, Tether is in a unique position to incentivize WDK uptake in a way no venture-backed startup or cash-strapped foundation could ever imagine. As the most profitable company in the world per employee with over $10 billion in annual free cash flow (as well as a massive balance sheet at its disposal), Tether benefits from a huge budget that could be used to aggressively subsidize fees on WDK wallets for many years. If structured appropriately, this could amount to a trivial customer acquisition cost relative to Treasury interest earned on incremental USDT float, not to mention the value of greater transaction fee capture over the longer term. While such a gambit may still be unsuccessful – and the ultimate incarnation of this move may leverage some foothold unrelated to WDK specifically – all the pieces are theoretically in place for the leading stablecoin issuer to take a greater share of the infrastructure on which it operates. In any case, the strategic trajectory here seems quite clear: public blockchains are becoming a feature toggle in a stack increasingly owned by issuers.

All of this makes sense given the superiority of database-like systems once a stack of intermediaries is assumed, as well as the blockchains’ well-documented issues with high-volume global payment throughput. But just as fundamentally, all the economic incentives for vertical integration by issuers skew this way as well. First, by insourcing the settlement layer, issuers can capture the fees that have till now leaked out to Ethereum, Solana, or Tron validators, effectively subsidizing someone else’s tech stack. This consideration will become especially critical as short-end interest rates compress – the clear top priority of incoming Fed Chairman Kevin Warsh – and the current “easy money” business model of collecting 4-5% on T-bills becomes less profitable. As rates fall, issuers will want to better monetize transaction volume, and the obvious first move in that direction is to stop leaking value to third-party infrastructure. Second, vertical integration offers control. As the stakes get higher, issuers will have less and less willingness to tolerate the long and winding road of blockchain consensus building, or to depend on the roadmaps and potentially disastrous technical decisions of third-party developers. Finally, competitive pressures will inexorably encourage this shift. In a race to the bottom on price, Issuer A will see their market share shrink if their users are stuck bearing the cost of volatile public gas fees while Issuer B offers free, instant transfers on a proprietary rail.

But what about…?

Critics might push back that such a shift toward proprietary walled gardens would sacrifice three key benefits of public blockchains: regulatory air cover, interoperability across issuers, and crypto ecosystem integration.

On the regulatory front, one might argue that outsourcing settlement to “neutral” public infrastructure gives issuers plausible deniability: they can claim they don’t control what users do with the tokens. However, this is manifestly untrue. Even putting aside the questionable label of “neutrality” to a blockchain governed in practice by a tight consortium with an established history of making decisions to benefit insiders, issuers absolutely retain control over balances, as attested by the litany of fund freezes we’ve discussed. Furthermore, in the context of an adversarial government, gesturing at an ostensibly “neutral” public chain to absolve an issuer of legal responsibilities is a thin excuse that we don’t imagine would hold much weight. On the flipside, if we assume a pro-stablecoin US Treasury bent on using these tokens to gain geopolitical leverage, then any legitimate lack of control would paradoxically be more of a bug than a feature. If the goal is to spread US-approved dollar hegemony, the government will undoubtedly demand greater influence in flows, more KYC, and granular permissioning (as should be clear from the compliance requirements imposed by the GENIUS Act). Adding layers of obfuscatory, “decentralized” governance considerations hinders rather than helps this supposed killer app of spreading government-sanctioned dollar dominance.

Elsewhere, skeptics may assert that in a world without robust public blockchains, the various issuers we’re emphasizing here will not have a clear shared rail on which to interoperate: if you have USDT and I want USDC, how will we pay each other without a common rail to link our respective issuers? But even putting our previously discussed issues with blockchain interoperability aside, a blockchain doesn’t magically solve the core “cross-issuer” problem because USDT → USDC is not simply a transfer, but rather a conversion of one issuer’s liability into another’s. Even in today’s blockchain paradigm, that conversion step is typically achieved through trusted, off-chain intermediaries (e.g. one or more custodians, exchanges, or PSPs debiting and crediting user balances as necessary); on-chain swaps via “decentralized exchanges” are achievable, but these still come with slippage risks, MEV opacity, and fee issues that we’ve discussed extensively (especially at scale). Either way, additional machinery is required for this conversion; it’s not something users and institutions seamlessly inherit just from “plugging into the blockchain.”

In practice, regardless of the settlement rail, the minimum primitives needed for true cross-issuer payment are: (1) liquidity to translate Issuer A’s liability into Issuer B’s at a known price; (2) a settlement / credit model that specifies who is taking risk during that conversion; (3) a common directory / routing scheme to identify and reliably reach the recipient’s endpoint; and (4) a common messaging standard to carry transaction instructions and complex metadata for compliance and commercial purposes. A blockchain can provide a limited solution to parts of (3) and (4) through global addressing, wallet-readable payment request formats, and naming layers like ENS, but as we saw in the “Interoperability” section above, blockchains lack many features needed to fulfill these requirements in an institutional context, and they end up adding to rather than replacing overall reconciliation surface. In the more issuer-centric world we’re contemplating here, cross-issuer interactions would therefore look less like “everyone sharing one chain” and more like what modern finance already does: governed networks and overlays that standardize participation, messaging, directories, and settlement conventions, while allowing each issuer to keep its own ledger.

More concretely, issuers A and B could join a common coordination layer, agree on rules and standards, connect to shared liquidity via market makers, and ultimately settle inter-institution dollar obligations in central bank money (directly or indirectly via settlement banks), all while abstracting this into a single “pay” button for a user. The previously discussed Circle Payments Network is an instructive early sketch of this direction: it is positioned as a coordination layer that orchestrates participant interactions and workflows (including long term support planned for a variety of stablecoins) by combining off-chain APIs and governed participation (CPN’s OFI / BFI model) to stitch together the various primitives we mentioned above. While CPN currently uses public blockchain settlement, its key mechanisms and primary benefits (governance, participant discovery, standardized information exchange, routing/liquidity coordination) are architected as a separate layer above that settlement; this modularity offers a plausible path for the same orchestration benefits to persist even if issuers progressively minimize reliance on public blockchains and shift more throughput toward proprietary ledgers. There will likely be several different possible approaches to cross-issuer interoperability, but the upshot is that a blockchain rail does not fundamentally solve the key issues at play here, and functional examples to address this question are already emerging.

Finally, critics may posit that walled gardens will break stablecoins’ ability to interface with “DeFi” and the broader “crypto” economy. However, there is no reason issuers couldn’t maintain bridges with mint/burn mechanisms to move tokens from their proprietary ledgers onto public chains for the users who truly want that utility (e.g. Circle’s CCTP). But more importantly, the vast majority of incremental capital that is supposedly waiting to flow into stablecoins (the archetypal “Global South” masses, the “unbanked” billions, the populations suffering under the hyperinflation of tinpot dictators) comes from cohorts that were never going to prioritize DeFi composability anyway. These groups want a reliable digital dollar, not a yield farm. Furthermore, the long-term organic demand for these crypto ecosystems is increasingly questionable: many data sets show various crypto trading KPIs stagnating or declining over the last five years, while the performance of basically every non-bitcoin crypto has been uniformly subpar. Meanwhile, the retail gambling itch that drove much early crypto adoption is now arguably being scratched much more effectively by explosively popular prediction markets, legalized sports betting, and retail equity apps like Robinhood. Therefore, while crypto integration may remain strategically useful in the near term, we do not expect it will be the primary determinant of issuer architecture as the larger commercial prize of mainstream payments and synthetic dollar access comes into focus over the longer term.25

Arguably, stablecoins being on blockchains at all was an accident of history, a distribution hack comparable to Netflix using the US Postal Service to ship DVDs or the internet building on telephone infrastructure for its early rollout. Just as Netflix and broadband leveraged existing infrastructure to reach a user base before building their own superior distribution mechanisms, Tether and Circle have used public blockchains to get plug-and-play access to an existing ecosystem of wallets and exchanges. This was an effective bootstrapping mechanism, but now that they have achieved critical mass and network effects, they have much less need for that distribution funnel. The reality is that the issuers control the asset users actually want – the synthetic dollar ledger – and they have both the ability and the incentives to continue scaling their businesses without reliance on fragile external systems that aren’t well-suited for their aspirational scale.

If successful, this kind of infrastructure shift will not happen overnight, but we expect value accrual will continue to shift consistently toward issuers as public blockchains are gradually deemphasized. This reality is perhaps best foreshadowed by the fact that Tether, while holding material positions in bitcoin, gold, and a variety of venture and credit investments, has never once stacked ETH, SOL, or TRX on its balance sheet, despite leveraging those chains daily for the bulk of its transfers. They know better than anyone that he who has the ledger makes the rules.

Conclusion: The Future of the Digital Dollar

The upshot of all this is not that stablecoins as such are a fad, a bubble, or likely to disappear anytime soon; on the contrary, it seems clear they’ve breached containment and are likely to benefit from accommodation and encouragement by the US government for the foreseeable future. However, based on everything we’ve discussed here, the longer term future they inhabit will likely bear little resemblance to the thriving blockchain-native Cambrian Explosion that has been the subject of much VC fantasizing. Instead, we are more likely heading toward a world of programmable digital dollars running on highly performant databases, the incarnations of which will sit on a spectrum of regulatory requirements ranging from truly dystopian to at least passably privacy-preserving, depending on use case and jurisdiction.

Through increased digitization and programmability, the evolving instantiations of the digital dollar may drive both user-facing upgrades and backend improvements to legacy infrastructure, and perhaps the Treasury’s gambit of using these Freedom Tokens (Trademark pending) to spread the dollar’s influence and sop up bill issuance will work swimmingly. But whatever architecture these systems ultimately take on, they will have progressively less need for – and are likely to gradually shift away from – “blockchain technology,” once again leaving crypto enthusiasts to seek out their next marketing narrative.

We would like to thank Chris Lane and Alex Bergeron for their technical review and feedback.

Appendix A: What About Bitcoin?

Readers may note that our discussion has largely ignored bitcoin, and those familiar with Ten31 may wonder how these various critiques and questions apply to our underlying thesis on bitcoin’s value proposition. As we acknowledged upfront, bitcoin – the original "blockchain technology" – naturally inherits similar base layer scaling limitations as all the other stablecoin-facilitating blockchains we’ve discussed elsewhere. However, the key difference in this context is that bitcoin users and developers have limited expectations for bitcoin to facilitate synthetic dollar transactions at meaningful scale. Some talented engineers and promising companies are currently attempting to tackle that problem in potentially interesting ways, but at the most fundamental level, bitcoin’s goal is to offer a resilient, globally accessible rail for transactions denominated in its own native, endogenous currency unit. Bitcoin is not attempting to be a better mousetrap for transferring dollar claims. Instead, it is seeking to be “outside money” like gold (except with much better portability, verifiability, divisibility, programmability, scarcity, etc): that is, an independent reserve asset and transaction network that cannot be unilaterally controlled or censored by state or corporate counterparties. Bitcoin will ultimately live or die based on the degree to which 1) it credibly achieves that goal and 2) the world continues to demand such outside money.

To be sure, bitcoin’s attractive characteristics as a monetary asset form a strong case that it will continue to gain institutional adoption (as suggested by developments including the launch of wildly successful bitcoin ETFs and the ongoing emergence of bitcoin as a pristine collateral), and such uptake may progressively lead to bitcoin being used as an alternative, neutral settlement rail for some high-value flows between currency systems. As major banks, international corporations, and governments begin to hold bitcoin more frequently as a reserve / collateral asset, it’s a short distance to then start settling some obligations directly and natively in bitcoin. That said, because a blockchain’s “map” can never be the “territory” of a fiat currency system, bitcoin – like the other blockchains we've discussed – would not be ideally suited to “speed up” or otherwise improve the finality of transfers within any individual system; in a fiat regime, you can’t get “more final” than central bank money. We therefore see this kind of development as most likely a gradual, organic process that would apply primarily to inter-system flows, e.g. flows between siloed banking systems or governments operating in different currency regime endpoints.

In this paradigm, bitcoin could serve as a connective layer between, say, Fedwire and Europe’s T2 (or their associated member banks) allowing both endpoints to convert between bitcoin and their local currency units for cross-system transfers as needed (essentially, $ <-> ₿ <-> €), potentially replacing a variety of international correspondent banking corridors over time. As an open source, technically resilient, and credibly neutral asset without an issuer, bitcoin has a strong case for offering superior inter-system finality relative to both blockchain-based stablecoins (which, as we’ve established, are built on layered counterparty stacks and come laden with intermediation pressures in practice) and legacy systems like CLS that ultimately depend on counterparty permission. But crucially, to avoid the blockchain pitfalls that we’ve enumerated in this piece, transacting institutions would need to value bitcoin’s properties independently and then have a willingness to use its native unit as a direct settlement mechanism, rather than trying to graft dollar claims “onto” bitcoin as in the stablecoin model. It remains an open question whether and when regulated fiat-native institutions may see sufficient value in bitcoin’s properties to begin gravitating in that direction, but a more extensive consideration of these possibilities can be found here.

In any case, even if such a bitcoin-fiat hybrid future never materializes and bitcoin only ever succeeds at becoming “digital gold” – i.e. providing a credible alternative to incumbent government-controlled base settlement systems – we expect that use case by itself to be extremely valuable, regardless of how the dollar system’s architecture evolves.

Appendix B: Some Rough Scaling Math

Having recognized that on-chain scaling comes with major throughput constraints, the Ethereum ecosystem has leaned heavily into the narrative of scaling transaction volume through off-chain L2 solutions (though interestingly, after significant capital and man-hours poured into this thesis, Ethereum founder Vitalik Buterin has recently suggested developers pivot back toward working on L1 scaling). However, the mechanics of this scaling trajectory are still limited by the main blockchain’s data availability budget at any given time, and the capacity of that budget gets more strained as transactions become more data-intensive, which is likely inevitable if the blockchain is to become a main settlement anchor for sophisticated global commerce.

The key variables to consider when projecting Ethereum’s L2-based scaling capacity are:

• Total L1 block capacity: The maximum available data and computation capacity per block in the Ethereum blockchain. This limit has increased over time and is expected to grow in the future, though not without trade-offs, and at any given time it constrains maximum potential transaction throughput. The current hard cap is 60 million “gas” units (i.e. units of computational work) per block, with a separate data availability budget for L2 “blobs” (see more below).

• Blob target / hard cap: A single “batch” of L2 transaction data posted to the L1 is a “blob.” The L1 blockchain has both a targeted and maximum allowed number of blobs per block (currently 14 and 21, respectively, with plans to move higher over time). As blobs per block rise above the target level, L1 fees (i.e. the cost of using scarce L1 blockspace) begin to increase nonlinearly, and the L1 will not accommodate more than its max blob budget per block. Note that L2 blobs occupy their own independent fee market and data budget separate from regular L1 transactions, but expansion of this budget is limited by blockchain performance considerations at higher blob counts.

• Blob size: The maximum total data contained within a given blob, currently set at ~131 kB (131,000 bytes). Along with constraints on number of blobs per block, this variable caps the aggregate amount of L1 data that can be occupied by L2 blobs (max # of blobs * max blob size).

• L2 data efficiency: L2s use various data compression techniques to publish batches of end-user activity into Ethereum’s limited data-availability budget, and they do this with varying degrees of efficiency. As a practical modeling assumption, the compressed data contribution of a simple, economically meaningful action (e.g. a plain transfer or a basic swap/trade) is often on the order of ~100–200 bytes per transaction, and this rises quickly for more complex / programmable interactions. Improvements in batching, encoding, and compression can reduce average bytes per transaction over time, but complex, heterogeneous “real-world” stablecoin flows (particularly those trying to use on-chain programmability) are a countervailing force pushing in the opposite direction. It’s also important to recognize that headline TPS counts can be misleading because they often treat all transactions equally even though transfers can vary massively in data weight, and because some observed “transaction volume” (depending on how TPS is measured) can be dominated by very small, repetitive bot flows; failed/reverted transaction attempts; and sequencer- or protocol-generated housekeeping activity that carries far less data than organic, payments-like usage. See these articles for some additional detail.

• Block interval: The target speed at which new blocks are added to the L1 blockchain. Currently set at 12 seconds, this can come down to improve effective throughput, but again not without trade-offs (discussed more below and in the main body of the text).

Let’s examine how some of these key swing factors would affect the scalability math in practice:

As these tables suggest, Ethereum’s roadmap potentially paves the way for higher TPS throughput via a series of both on-chain and off-chain upgrades to take place over the coming years that will expand total L1 capacity, capacity available for L2 blobs specifically, and the data compression efficiency of L2 transactions. However, these are not simply dials that can be cranked up arbitrarily high, as these changes will invite more trade-offs and risks, including:

• L1 Centralization Pressure: Increasing the L1 gas limit raises the hardware requirements for individual nodes, as they must process more data and computation within the 12-second block window. This risks progressively pricing out individuals and smaller validators and is an iteration of the fundamental blockchain scaling trade-off we’ve discussed extensively throughout this piece.

• Block Propagation Risk: Blocks with more data take longer to reach full transmission across Ethereum’s network of validators, increasing the time necessary to achieve global consensus. This can lead to an increase in “orphan blocks,” weakening the L1’s stability and dependability.

• Execution Time / DoS Risk: Larger blocks are more vulnerable to Denial of Service (“DoS”) attacks whereby a malicious actor could engineer blocks that require the entire 12-second block window to validate, leaving no time for proper block propagation and potentially stalling throughput or disrupting network synchronization.

• L2 Centralization Pressure: As L2s attempt to scale up to handle thousands of transactions per second – and especially as they adopt technology to generate the zero knowledge (“ZK”) proofs that are necessary to effectively scale more complex transactions – they will increasingly require both specialized hardware and management of significant operational complexity, likely driving consolidation toward a few well-capitalized players (note that the vast majority of L2 activity already runs through a fairly small handful of rollups).

• Maximum Extractable Value (“MEV”): As discussed elsewhere, this emergent headwind to transaction cost and speed for the average user is likely to become both more pronounced and more opaque as L2 volume grows and becomes more heterogeneous, particularly if L2s continue to see centralization pressure.

• Higher Censorship Vulnerability: If users come to rely more on a progressively smaller consortium of L2s to be able to interact with Ethereum, they will increasingly face less assurance of permissionless access and censorship resistance. This can potentially be mitigated by “sovereign exit” systems that ostensibly give users an ongoing ability to unilaterally transfer balances back to the L1, but this ability is likely to be economically unenforceable in any mass exit event (e.g. if an L2 were to become malicious or unreachable, the demand for exit to the L1 could drive fees well above the value of many users’ total holdings).

• Lower Auditability: ZK proofs – a key mechanism that L2s may use to improve transaction compression – help to maintain scalability as transactions get more complex, but at the cost of reducing the on-chain audit trail of how funds are moving, which will create significant hurdles for any institutional-grade finance seeking to leverage Ethereum.

While the Ethereum roadmap includes various proposals and changes to manage these issues, this inexhaustive list of multidimensional problems should suffice to show that reliably scaling throughput is not simply a matter of toggling a few variables, and it will almost certainly come with both technical risks and hard trade-offs. But notice that even if the ecosystem succeeds at boosting block capacity and compressing transaction data while managing all of these edge cases, it is still likely to only achieve organic payments throughput below what can already be achieved with the traditional high-performance databases that power modern payments (generally reliable TPS of 50,000+) while almost certainly sacrificing much of its claim to decentralization in the process. Whatever the other merits of the final, fully scaled incarnation of Ethereum might be, the system looks set to occupy, at best, an awkward middle ground between decentralization and throughput, making it unlikely to become a superior rail for powering trillions in complex dollar-denominated commerce.

We’re at the point in the cycle where everything is basically one trade – oil NGU or nah? – and yet most of the headlines related to that trade are borderline useless for decisionmaking, if not outright propaganda. Both Panicans and Plan Trusters are firmly convinced they see the full chessboard, with the menu of interpretive heuristics effectively reduced to either 1) a uniquely incompetent deep state apparatus totally blindsided that *checks notes* oil prices went up due to a war in the Middle East or 2) a White House occupied by a reincarnation of Sun Tzu. For our part, the predominant tenor of headlines in the mainstream press continues to suggest that view #1 is trading too rich, but we would mostly recommend readers keep their eye on the balls they can see most clearly and with the least obfuscatory smoke, including that Fed Chairman Jerome Powell felt it appropriate to signal that the central bank will likely “look through” the current oil supply shock when making decisions on rates, a view he was definitively not ready to take during last year’s tariff tantrum. Meanwhile, every week brings new and more challenging headlines for themes including the US private credit complex (with or without an extended oil shock); the unipolar rules-based order of the past 40 years that assumed frictionless global arbitrage, capital mobility, and open consumer goods markets; and cheap, widely available commodities and critical material inputs. Whether there is a Plan to be Trusted or not, all of these highly visible and inarguable sea changes will have sustained impacts on how nations build and protect their capital stocks and national savings going forward, and we continue to think this has underappreciated implications for globally liquid, scarce reserve assets.

Selected Portfolio News

Strike launched business loans in California and Vermont:

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.

Media

Ten31 Managing Partner Marty Bent appeared on the Blockspace podcast and RoxomTV.

Battery Finance CIO Thierry Adant appeared on the Real Estate Standard show to discuss the growing intersection between bitcoin and real estate.

Market Updates

It’s becoming nearly pointless to track and tabulate all the headlines in the latest chapter of the multi-millennial saga of Middle Eastern chaos, but for what it’s worth, the Trump administration directly or indirectly informed the public this week that:

• Regime change has already happened in Iran and a deal is coming soon

• But if a deal doesn’t come soon, we will totally obliterate the country’s oil infrastructure

• But Iran’s President is a sensible fella and has asked for a ceasefire

• But the US will only grant that ceasefire if the Strait of Hormuz is opened up

• But we might also just leave the Gulf without reopening the Strait

• Though we’re also considering just taking the oil, which would be a “GUSHER FOR THE WORLD???”

• But either way, no ground troops will be needed

• But also the Pentagon is ready for weeks of ground operations in the region

Whatever you make of all that, the speaker of Iran’s parliament took to Twitter again this week to tell everyone to fade any positive market moves driven by Trump’s statements, suggesting the speaker has a promising backup career as a Substack analyst if the whole theocratic dictatorship thing doesn’t work out.

While the President’s intentions in the region remain (perhaps intentionally) obscure, some reports this week at least pointed to a loosening of flows through the Strait of Hormuz, as roughly 4 million barrels of oil exited the waterway on Thursday, the largest outflow since the start of the conflict. At the same time, a French-owned container ship crossed the Strait, marking the first explicitly Western crossing since February.

Meanwhile, Saudi Arabia’s East-West pipeline that feeds shipping routes in the Red Sea ramped up to its maximum capacity of 7 million barrels per day (vs just 1-2 million a few weeks ago), partially offsetting some of the lost Hormuz volume.

However, Yemen’s Houthis (the source of the early 2025 attacks in the Red Sea that led to Signalgate) appeared to enter the conflict for the first time at Iran’s encouragement, potentially posing issues for this alternate supply route. Everyone’s favorite Iranian shitposter popped back up to insinuate that this region is just as vulnerable as Hormuz.

Underneath all the headlines and vacillating bluster from the White House, one theme that seemed increasingly clear was the administration’s narrative framing of the “free rider” security problem that Trump adviser and Fed appointee Stephen Miran has repeatedly pointed out, as the President suggested that Gulf countries should be the ones to take charge of (and pay for) security in the area, while telling Europeans that they should just “go get their own” resources out of the Gulf rather than assuming the US will keep shipping lanes open for them.

Notably, in comments echoing his aggressive Davos speech from earlier this year which heralded an end to the “rules-based order,” Trump also explicitly suggested he’s considering withdrawing the US from NATO due to Europe’s alleged (and, to be fair, kind of observable) refusal to support US activities in the Gulf.

The President made this case even more directly in a speech on Wednesday night, wherein he outlined that the options for nations depending on the Strait are to deal with the problem independently, buy oil and gas from the US, or just wait for the Strait to “open naturally.”

Oil prices saw some relief for part of the week, but these comments sent key benchmarks ripping once again, with both WTI and Brent closing the week above $110 / barrel. Some headlines suggested the very wide Brent / WTI premium we flagged a few weeks ago actually flipped to a discount (i.e. WTI rose above Brent) for the first time in years, though it looks like the large premium is still intact on an apples-to-apples basis.

As it relates to the relative impacts of this ongoing disruption – a core theme we’ve focused on in the past few weeks – the helium market continues to experience severe shortages, which has serious implications for semiconductor production and may give the US (the world’s largest helium producer) incremental leverage in the fight over chip infrastructure.

Elsewhere, Qatar Energy announced it will be ramping up LNG production…in Texas. When fully operational, its new Golden Pass facility – part of a JV with Exxon – will produce 18 million metric tons of LNG annually, surpassing the ~12.8 million in capacity recently knocked offline in the Gulf and adding to the US’s position as world’s largest LNG exporter.

That said, China is also benefiting on the LNG side for now, as local firms are capitalizing on spiking Asia prices by reselling gas in record volumes.

On the rare earths front, a US firm completed a long-delayed purchase of one of the last few major cobalt miners not under Chinese control while inking a $565 million deal for Brazilian rare earths that had previously been earmarked for China (though crucially, it remains unclear how to do the hard part of actually refining these raw materials in US-aligned jurisdictions).

North of the border, the Alberta independence movement reached the threshold of petition signatures needed to force a referendum vote in October. If successful, the vote would put the future of Canada’s main oil-producing province – including a large constituency of pro-Trump Canadians – in question.

Across the Pacific, despite this month’s massive energy market dislocations, China factory activity returned to growth in March, with PMIs inching into positive territory after a decline in February (though input costs also surged at the fastest pace since 2022). Notably, the government has reportedly instructed local oil refiners to maintain fuel production at all costs, even if losses are required.

Despite the increasingly strained special relationship between the US and Europe, EU officials are considering a “Western steel alliance” to ringfence the G7 steel industry from Chinese “overcapacity.”

Stateside, the March US PMI reading came in at 52.7, higher than expected and up M/M, good for the third consecutive month in expansion territory after several years of unbroken contractionary readings.

After a rough February readout, Non-Farm Payrolls data for March were well above consensus at +178,000, with January’s figures also revised higher (notably, the entirety of the gain was driven by private payrolls).

On the flipside of those more positive data points, the private credit complex continued to post concerning headlines, as Blue Owl reported a huge spike in redemption requests at several funds, including 22% of its flagship $36 billion fund and nearly half of its smaller tech-focused fund.

A Wall Street Journal analysis suggested the asset class’s exposure to the embattled software industry is larger than appreciated, while ratings agency Fitch reported a 14-year high in the proportion of private credit interest electing non-cash PIK (Payment in Kind) treatment.

After much recent investor consternation regarding how the Federal Reserve might respond to the oil shock out of the Middle East, Fed Chairman Jerome Powell said this week that the central bank would not look to hike rates just because of the energy price spike (though Powell appears to have wisely excised the word “transitory” from his vocabulary).

Fed Governor and Certified Low Rates Enjoyer Stephen Miran, meanwhile, said he thinks benchmark rates can still go a full point lower from here.

Amid the biggest upheaval in the global order in at least 50 years, the consensus safe haven asset of US Treasuries saw official international holdings shrink to their lowest level since 2012 (though it should be noted that a lot of that gap has been backfilled by semi-private organizations linked to sovereign buyers).

Though basically flat for the past month, the end of March saw bitcoin officially close out its worst quarter since Q1 2018.

But regardless of muted sentiment, Square officially auto-enabled bitcoin payments at its 4 million merchant terminals around the country, and the first bitcoin-backed municipal bond cleared a notable hurdle by achieving a rating from Moody’s.

And for what it’s worth, Goldman Sachs published a report suggesting bitcoin may have already reached its cyclical bottom.

Regulatory Update

President Trump made his most direct statement on bitcoin in close to a year, telling a room of investors and policymakers that “bitcoin is very powerful” and reiterating that the US will be the “crypto and bitcoin superpower of the world.”

In response to an Executive Order from August, the Department of Labor published a proposed set of rules for 401(k) administrators to open up access to bitcoin and other digital assets.

Senators Cynthia Lummis and Bill Cassidy introduced a bill that would create a “voluntary certification program” for US bitcoin miners to transition away from mining equipment produced by “foreign adversaries,” though it’s unclear how realistic this would be in the near-term given the vast majority of ASICs are still produced by the Chinese Bitmain / MicroBT duopoly.

Notably, the bill would also codify President Trump’s Strategic Bitcoin Reserve into law under the administration of the Treasury Department.

Noteworthy

The quantum computing hornet’s nest was kicked once again this week, as two new papers – one by Google Quantum and one by Caltech and startup Oratomic – claimed significant theoretical efficiency gains in running Shor’s algorithm, which could allow a hypothetical future quantum computer to crack private keys more quickly and with lower computational resources.

Many bits have been flipped on this issue, but for anyone new to the story, we recommend checking out the overview we wrote last year, as well as:

• Some reviews of the material engineering and physical scaling constraints confronting the development of a functioning, cryptographically relevant quantum computer

• A detailed summary of ongoing quantum mitigation measures in development by different elements of the bitcoin development community

• A helpful overview from Bitcoin Optech regarding progress on quantum research in 2025

• A new proposal – released just this week – from cryptography researcher Jonas Nick for quantum-resistant signatures that could be much more compact than prior proposals

• Another new proposal for leveraging isogeny cryptography for even smaller post-quantum signatures

• An accessible summary of the situation and potential paths forward – some of which would not require a near-term soft fork – from longtime bitcoin developer Matt Corallo

The Bitcoin Policy Institute published a paper outlining the case for Taiwan to allocate a portion of its $600 billion sovereign wealth fund to bitcoin.

Drift, a Solana “DeFi” platform, was hacked for over $200 million, the latest entry in a long string of DeFi security incidents.

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

That’s a wrap on Week Four of Mr. Trump’s Wild Ride, and unfortunately the Fog of War just continues to grow thicker by the day, with journalists and newly-minted maritime experts on Twitter breathlessly repeating and trading on every remark from the US, Israel, and Iran (three famously transparent and reliable regimes). As the market waits to see whether we’re looking at a repeat of Britain’s international downfall in the 1956 Suez Crisis or the start of a 50-year era of peace and trade stability led by the US, our attention increasingly turned this week to an emerging consensus view that, far from being able to cut benchmark rates this year, the Fed will actually need to hike rates to combat the inflationary impacts of ongoing oil flow disruptions out of the Middle East. For part of this week, the CME Fedwatch tool indicated coin-flip odds of some degree of rate hikes by year-end, and while we’re far from rates traders, we remain deeply unconvinced that the Fed has any real room to get meaningfully tighter, absent a political willingness for true fiscal austerity (lol, lmao even). As we wrote about earlier this year following the Kevin Warsh nomination, the US fiscal position is far from what it was even 20 years ago – much less 50, during the last major global oil shock – and blended interest expense even a bit higher than the current level is consequently unworkable relative to nondiscretionary federal outlays, particularly now that we may need untold incremental trillions to kill bad guys. We won’t try to call the exact transmission mechanisms or new alphabet soup facilities that may ultimately be required, but history clearly suggests that the exigencies of any (real or Trumped Up) emergency that threatens a sovereign’s hegemony will dominate any concerns over headline inflation prints. To anyone who believes the Fed can’t be accommodative for fear of inflation in the face of commodity shocks and supply chain disruptions, we would suggest your grandparents might beg to differ.

With all that in mind, we also thought it was an interesting week for some fundamental developments in bitcoin. First off, ETF flows are now almost back to flat on the year despite massive volatility both in the price and the broader global stage, and Morgan Stanley – whose overall asset management business runs nearly $10 trillion in AUM – announced that their upcoming bitcoin ETF (one of just a few vehicles bearing the flagship Morgan Stanley branding) will be the cheapest option on the market, undercutting IBIT on fees in a signal of the demand the platform is likely seeing from its advisors. Meanwhile, Fannie Mae opened the door to a new mortgage structure that lets bitcoin-backed financing (without any mark to market component) support officially conforming mortgages, opening such loans up to the secondary market and potentially paving the way for a major new integration of bitcoin into traditional financial products. While most investors remain focused on hedging the minute to minute remarks of bureaucrats around the world, we would encourage readers to stay focused on this ongoing drumbeat of fundamentally constructive news flow for bitcoin, particularly if our thoughts on the Fed’s posture in the current environment prove to be directionally correct.

Selected Portfolio News

Fold launched the full rollout of its credit card, which offers users up to 4% back in bitcoin:

Debifi launched the beta for its institutional lending API:

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.

Media

Ten31 Managing Partner Matt Odell joined the Bitcoin News show to discuss a wide variety of topics, including the increasing convergence between bitcoin and AI.

Market Updates

President Trump once again made sure everyone had a pleasant weekend with a vintage Truth Social post – crucially, after markets were closed – threatening Iran with strikes on the country’s power plants if the Strait of Hormuz was not opened in 48 hours.

Before Monday’s market open, though, the President suggested talks for a resolution have been productive and agreed to extend the deadline to Friday, then later extended that deadline for another 10 days after simultaneously suggesting that Iran has given the US a “very big present”, they’re begging to make a deal, but also that their negotiators need to “get serious before it’s too late.”

While Trump continues his classic Michael Scott snip-snap routine and Treasury Secretary Scott Bessent suggests we need to “escalate to de-escalate”, Iranian officials have largely projected an adversarial posture and insisted all week that no negotiations are taking place.

Perhaps most aggressively and notably, the speaker of Iran’s parliament tweeted that the country will specifically target large holders of US Treasuries, the conflict’s first explicit acknowledgment of one of the US’s main points of vulnerability (though to be fair, this is also a pretty long list that basically amounts to most major US allies).

We’d probably tend to fade the reliability of all public comments made from all sides of the conflict, as well as all corporate press reporting based on “sources familiar with the matter,” but for whatever it’s worth, various reports suggested the US has delivered a 15-point plan that has gained traction with factions of Iran’s government.

Secretary of State Marco Rubio was less optimistic, suggesting to G7 allies that the fighting will continue for another 2-4 weeks. It remains unclear if that will be enough time for the President to establish joint custody of the Strait with the Ayatollah and rebrand it as the Strait of Trump.

Even amid all the disruption and oil prices hitting highs not seen in several years, the President commented this week that he actually expected prices to go even higher than they have, but either way they’ll all return to prior levels soon.

But all the feints at de-escalation – which seem to be progressively losing their efficacy – weren’t enough to get oil prices meaningfully lower, as WTI closed the week just above $100. Meanwhile, the Brent-WTI spread we flagged last week has remained elevated and around decade+ highs.

To that point, the Washington Post flagged this week that US natural gas exporters will be key beneficiaries of this conflict, in line with our prior observations about asymmetric impacts between energy exporters and importers.

At the same time, local reports suggest the disruptions are starting to bite Chinese manufacturing, with many producers curtailing production due to spikes in raw material and logistics costs of more than 50%.

Chinese ships have reportedly also not been able (or have elected not to attempt) to exit the Strait this week despite explicit assurances from the Iranian regime, an interesting data point for the consensus view of affairs in the area.

However, reporting out of the Gulf also suggests Iran’s ongoing strikes around the region have severely damaged many nearby US bases, potentially crimping the military’s influence and operational capacity near the Strait.

Meanwhile, the disruptions have naturally also started to present significant headwinds for US allies in the East, as the Philippines became the first country to declare a national energy emergency due to the war, while South Korea imposed new export controls and “hoarding bans” on key commodities, and over 8% of Australian fuel stations are now struggling to stay stocked.

Finally, and most crucially for the US’s ability to sustain its current posture, US Treasury yields hovered around recent highs all week and escalated to almost 4.5% on Friday before pulling back a bit, as the MOVE Treasury volatility index – which has significant implications for the hedge funds that have come to represent a key pillar of issuance absorption – continued to climb to another post-Liberation Day high of 115.

While we hesitate to point mouth agape at every negative Treasury auction headline that comes across the wire, it was also a rough week for new issuance, as three separate auctions put up poor results.

In response, a former Fed analyst and advisor to temporary Fed Governor Stephen Miran published a piece arguing the Fed should extend swap lines to foreign sovereign wealth funds, pension funds, and similar private / semi-private actors that have large Treasury holdings they may otherwise need to tap into for liquidity during the ongoing Gulf chaos.

Pro-liquidity implications of that plan aside, Miran himself said he believes the Fed has a path to slowly reducing the size of its balance sheet by $1-2 trillion.

The Financial Times published a piece this week suggesting that Secretary Bessent is explicitly seeking greater control over the Federal Reserve, a regime shift that the dynamics above could make increasingly important. However, Bessent – never one to mince words – denied the claims in no uncertain terms.

Like last week, overseas sovereign debt markets felt even more pain, as yields on long-dated Bunds, OATs, Gilts, and JGBs all continued to surge to new multi-decade highs (and don’t look now, but the USDJPY cross broke through the closely watched 160 level for just the second time in nearly 40 years late Friday).

The growing quagmire and upward energy price pressure has now officially pushed traders into betting on Fed rate hikes before year-end to counter expected inflation pressure.

Negative headlines continued to pile up in the private credit complex as well, as Apollo and Ares joined their megafund peers in gating redemptions by wide margins, and Moody’s cut its ratings on several other funds.

Nevertheless, BlackRock CEO Larry Fink argued that Social Security’s trust funds should invest more aggressively into higher-return instruments (like maybe…private credit?) to help Americans more effectively build wealth.

All the volatility and uncertainty continued to weigh on equities as well, officially pushing the Dow and Nasdaq into correction territory. The general liquidity backdrop is not helping matters here, with multiple indices pointing to sharp recent declines in global liquidity.

Despite the will-they / won’t-they between Trump and the Ayatollah and rough bitcoin price action on the year, flows into bitcoin ETFs have remained extremely resilient and have now almost erased all cumulative outflows from early in the year.

Morgan Stanley’s upcoming spot bitcoin ETF plans to charge only 14bps on AUM, making it the cheapest ETF option available, an interesting signpost for the type of demand the bank may be seeing within its asset management channel.

Following a directive from FHFA Chairman Bill Pulte last year, US mortgage market lynchpin Fannie Mae announced it will begin supporting a new form of bitcoin-backed mortgage. The agency will treat mortgages that use bitcoin as collateral – without any mark to market component – as standard conforming mortgages, potentially opening up a major new integration of bitcoin into traditional financial plumbing.

Elsewhere, bitcoin has seen a steep decline in network hashrate over the past two weeks, with the headline figure declining more than 50EH/s since the start of March, likely due at least in part to energy disruptions from the conflict in the Gulf.

Regulatory Update

The long-stalled CLARITY Act reached a new compromise proposal this week, potentially positioning the bill to move forward. However, key industry participants apparently remain unsatisfied as the latest version would still prevent stablecoin issuers from paying yield to holders, an update that drove significant declines in Circle and Coinbase stocks this week.

The Bitcoin Policy Institute brought together representatives from Coinbase, Block, and River on Capitol Hill to push for a bitcoin de minimis tax exemption.

However, the recently released PARITY Act appears to still exclude bitcoin from de minimis exemptions (while protecting, humorously, stablecoin payments). The bill also only provides double-taxation relief for staking protocols and leaves bitcoin mining still exposed to the same punitive treatment (whereby mining rewards are first taxed as ordinary income upon generation, only to be also subjected to capital gains tax when those rewards are sold or spent).

Noteworthy

Major public bitcoin miner MARA retired a $1 billion convertible note by selling ~15,000 of bitcoin from its corporate treasury. The company continues to hold over 38,000 bitcoin on its balance sheet.

As an interesting data point in the US-China decoupling we’ve flagged in this newsletter over the past year, Murata Manufacturing – a key Apple supplier worth ~$50 billion – announced a move to separate its Chinese rare earth supply chain from the rest of its business.

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

We are as eager to stop writing about obscure details of Persian Gulf geography as you are to stop reading about them, but unfortunately that story remained the dominant driver of global markets this week. Once again, though, we suspect that the narrative generally being propagated by both poles of the mainstream press may be missing some important angles. The chaos being wrought in the Gulf is obvious, but few pundits seem to be asking some of the most important questions, including: who’s actually keeping the Strait of Hormuz closed, what are the relative impacts of that standstill, and who benefits from that state of affairs? Once again, we’ll keep our claims modest as our circle of competence does not extend into international game theory, but we find it curious that President Trump – among the most prolific and outspoken critics of any individuals or industries that seem to be hampering his popularity – has yet to publicly denounce oil companies or insurance companies for spiking energy prices and maritime insurance rates. We also find it interesting that the spread between WTI crude oil (the key grade for US consumption and export) and Brent crude (which is primarily consumed in Europe and Asia) has ripped to an 11-year high, a dynamic that if sustained would put asymmetric pressure on both key US rivals and recalcitrant allies the White House may be looking to bring to the table. This testing of the Law of One Price for oil may be particularly advantageous for an energy-independent net oil exporter facing down a fast-advancing but energy-constrained rival, particularly when said net exporter has broad refining capacity ideally equipped for locally abundant heavy crude.

All that being said: the bond market gets a say too. Even if, for the sake of argument, all of the above considerations are top of mind for the folks crafting the Strategery^TM at the DOW, the US still has to confront the key sequencing question of whether Western financial markets can actually sustain the level of near-term pain that may be required to make some version of this plan work. Sovereign debt markets are starting to definitively vote in the negative on this point, with the US 10-year yield rising back toward highs from last summer, the MOVE volatility index reaching its highest reading since Liberation Day, and European sovereign yields hitting levels not seen since the Eurozone crisis of the early 2010s. This will all get even more complicated if – as some traders are now betting – the Federal Reserve reacts to upward momentum in inflation prints with benchmark rate hikes rather than the cuts the market was banking on just a month ago (though to be frank, this isn’t 1978 anymore, and we would tend to fade the idea that anyone in the Eccles Building has the stomach to raise rates into the biggest global economic shock since COVID). If the US truly wants to commit to a bifurcation of global commodity markets, we would lean cautiously toward the view that it has the monetary tools to anesthetize financial markets enough to do so (while fulfilling the populist demands that will likely follow); notably, that view also has clear implications for bitcoin, which the magic internet money’s recent resilience against global turmoil may be starting to suggest.

Selected Portfolio News

Primal rolled out version 3.0, a major update including an overhauled wallet and many new features:

Strike launched its line of credit product for businesses in 43 states:

While expanding its consumer-facing line of credit product to 21 more states:

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.

Media

Giga Energy was featured in The Information for its impressive revenue and operational milestones achieved with very little capital raised. Ten31 is proud to have written the first check to support Giga at launch.

Market Updates

With the world wrapping up week three of President Trump’s “four weeks or less” romp through the Persian Gulf, US Energy Secretary Chris Wright assured the public that the conflict will end in the next few weeks, maybe sooner (we just need Two Weeks to Slow the Shells).

Even so, the situation in the Strait of Hormuz remains extremely uncertain. The US is allowing Iranian tankers through the passage for now, though Germany rejected the White House’s request for naval support in the area. France heroically suggested they will answer the call (but only once the whole fighting part is done).

In response to the hand-wringing from NATO allies, the President floated the idea of just abandoning the waterway altogether and letting others figure it out, which may or may not happen but would likely have asymmetrically negative impact on US adversaries.

Trump reiterated that stance more directly on Friday evening, suggesting that while he doesn’t want a ceasefire (because we are, after all, “obliterating them”), he is considering winding down military operations in the Gulf and letting “the nations who use [the Strait]” police it as necessary.

Whatever might be the truth underpinning this latest round of Strategic Uncertainty, Trump has continued to commit to not deploying US troops for the fight.

But somewhat curiously for an operation that may wind down soon and won’t involve boots on the ground, the Pentagon requested $200 billion of additional funding (roughly the cumulative amount spent on whatever we want to call the whole thing in Ukraine) for operations in Iran.

Drawing on the wisdom of history’s great military theorists like Sun Tzu and Carl von Clausewitz, Secretary of War Pete Hegseth justified the appropriation by noting “it takes money to kill bad guys.”

In a similar vein, Israeli President Benjamin Netanyahu suggested the same day that ground operations will be required to complete the mission in Iran (despite the US and Israel once again totally eliminating the nuclear program that we somehow also totally eliminated last June).

Treasury Secretary Scott Bessent also didn’t rule out the idea of the US seizing Kharg Island – a key hub for Iranian oil exports through the Strait – though it’s unclear how much impact that would ultimately have regardless.

The continuing chaos – which the IEA called the greatest threat to global energy security in history – kept oil prices elevated all week but wasn’t quite enough to drive new highs relative to a few weeks ago; however, officials in Saudi Arabia suggested that oil could clear $180 per barrel if fighting continues into mid-April.

At the same time, it’s worth noting that the Middle Eastern markets most affected by the disruptions are already seeing prices north of $150 per barrel, and more generally, the spread between WTI (the key US-linked benchmark) and Brent crude (a benchmark primarily linked to Europe, the Middle East, and Asia) has blown out to an 11-year high, underscoring the often hidden heterogeneity of the global oil market and the potential advantages of being a net oil exporter.

However long a resolution takes, one theme that’s increasingly clear is that a good deal of damage to global oil and commodity markets has already been sustained that won’t be easily mended even if all conflicts cease tomorrow, as QatarEnergy’s CEO indicated that 17% of the country’s LNG capacity has already been knocked offline for up to 5 years.

Meanwhile, the conflict has also thrown many adjacent commodity markets into disarray, as the suspension of traffic through the Strait has choked off a major source of fertilizer supplies and has already driven 30-50% price spikes in key benchmarks, likely putting upward pressure on food prices in many developed economies and outright shortages in less developed areas.

These disruptions are problematic enough, but S&P flagged the downstream impact of more than $300 billion of potential capital flight out of the Persian Gulf that could put a major strain on regional banks should fighting continue much longer (though this is not the rating agency’s current base case).

Back in the US, the latest wholesale inflation report added fuel to the fire, as the February PPI was up 70bps M/M and 3.4% annually, well above expectations even before any meaningful impact from this month’s Middle East stalemate.

You could almost forget that this was also a Fed Week, but everyone’s favorite central bankers indeed met for their periodic entrail-reading, this time resulting in a decision to hold benchmark rates steady. Outgoing (?) Fed Chairman Jerome Powell acknowledged, in what may be the understatement of the year, that the implications of the situation in Iran are “uncertain” for the US, though the central bank expects reported inflation to move higher.

The market was a little less measured, as investors more or less priced out any further rate cuts until well into next year – with increasing chatter about rate hikes – and the Fed grapples with what could be a bout of stagflation. The bond market was even more forceful, as the US 10-year yield broke 4.3% for the first time since August and closed Friday just under 4.4%.

As we noted last week, these levels on the 10-year remain in the range established over the past few years, but perhaps more importantly, the MOVE Treasury volatility index printed 109 on Friday evening, its highest level since Liberation Day.

European sovereign debt also continued to get rocked even more notably, with yields on major continental issues putting in new post-2011 highs once again this week and long-end UK gilts reaching for nearly 20-year highs.

Just for good measure, gold joined the selloff party in earnest, dropping 10% on the week for its worst weekly performance since 2011. The downdraft – a somewhat surprising move for what many investors view as the apex risk-off safe haven – may reflect a noteworthy evolution in gold’s role within the global monetary system, but either way it prompted a wave of “in it for the tech” tweets from the online Goldbug support group.

Equity indices also got hammered, with the small-cap Russell 2000 officially entering a correction while the S&P500 reached a 6-month low and lost its 200DMA support.

Very interestingly, against this increasingly volatile backdrop, bitcoin maintained its recent relative resilience, ending the week basically flat.

Even as the Middle East threatens to bring the global economy to a standstill, the Donroe Doctrine has continued apace in the Western Hemisphere, as Cuban protest activity has reportedly intensified just as the Trump administration looks to finally oust the country’s Castro-linked government.

Domestically, the US trade deficit shrunk 25% M/M in January, though that follows a spike in December, the current levels are still not far off the pre-2025 range, and much of this month’s positive move was driven by gold exports.

Following a multi-week streak at par, Strategy’s STRC preferred vehicle fell slightly below its key $100 level all week; however, the company’s latest 8K filing indicated that STRC enabled MSTR to purchase nearly 17,000 bitcoin in the prior week.

Regulatory Update

The CFTC delivered a no-action letter to Phantom Wallet, a prominent wallet provider in the Solana ecosystem, indicating that the agency will not pursue regulatory action against Phantom for providing self-custodial interfaces to registered derivatives platforms. This update could help to demarcate a welcome bright-line distinction for developers of non-custodial software.

Noteworthy

A research group out of Cambridge published a longitudinal study based on 11 years of data suggesting that the bitcoin network could maintain global connectivity even if the vast majority of worldwide undersea cables were simultaneously severed, a data point highlighting the resilience of bitcoin’s design.

As of March 30th, Square will auto-enable bitcoin payments for all eligible merchants using a Square terminal, removing the need for sellers to explicitly opt in.

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

If you’re anything like us, the last thing you want to read is another half-baked screed on the hourly direction of oil prices, how the US is totally cooked, or how Iran’s military has been completely annihilated. You’ll find plenty of Strait of Hormuz content below, but we think it’s helpful in weeks like this – amid the unending noise of White House claims that the war is almost won and dubious anonymous sources covertly predicting the US’s imminent downfall to corporate media – to step back to the 10,000 foot view of what might really be guiding decisionmaking at the highest level. While we fade anyone who claims to have the perfect Rosetta Stone for complex geopolitical events, we continue to think the China decoupling angle remains the most legible way to understand much of what’s really going on as the US dukes it out over 100 miles of waterway in the Middle East. There are far too many variables and reflexive relationships in the mix to make a call on how that agenda may ultimately play out, but with bond volatility back on the menu, US Treasuries failing to catch a safe haven bid, and a major source of Chinese oil increasingly threatened even as the country’s export model faces growing challenges from tariff policy, it increasingly feels like the core question for the world is who says uncle first: Western sovereign debt markets or Chinese industrial capacity? We could probably paint a case in either direction (and FinTwit is replete with attempts to do so), but we’d argue that consensus has not yet captured that either path has extremely pro-liquidity implications in the long run, as the system of mutual dependency between the East and West cannot be unwound without some form of financial repression either at home or abroad. The road ahead will be filled with potholes and detours, but we continue to believe that the events of the past 18 months point very clearly in one particular direction for neutral, globally accessible hard assets.

Selected Portfolio News

Coinkite announced the new Mk5 Coldcard, the company’s latest update to its flagship product line of the most widely trusted hardware wallets in bitcoin:

Strike increased early direct deposit limits to $10,000:

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.

Media

Ten31 Managing Partner Jonathan Kirkwood published a new essay on the role of bitcoin and stablecoins in the evolving global capital circuit.

Ten31 Principal John Arnold appeared on the Build with Bitcoin podcast to discuss Ten31’s strategy and current views on the bitcoin ecosystem.

Unchained collaborated with ARK Invest for a deep dive look at the potential long-term threat of quantum computing and likely mitigation strategies for bitcoin.

Market Updates

The world’s key base input to *checks notes* everything traded like an illiquid shitcoin all week, as the whiplash of oscillating headlines out of the Middle East sent oil’s price spiking to nearly $120 on Monday morning.

This move retraced after some reports on various G7 countries considering a massive drain of their strategic petroleum reserves, then even more violently reversed after President Trump suggested the war in Iran is “very complete, pretty much.”

Later in the week, the President told reporters “there’s practically nothing left to target” in the country, even as Iran seemingly continued to launch attacks on tankers in the key shipping chokepoint of the Strait of Hormuz.

Meanwhile, the country’s new supreme leader insisted the Strait must remain impassable to pressure the US while warning of an imminent 2-handle on the price of oil.

Outside the Strait itself, things continued to get even more squirrely for the oil market all week, as drone strikes compelled the UAE to close its largest oil refinery, taking close to 1 million barrels per day offline. Even more notably, the world’s largest LNG plant in Qatar has now been dormant for a full week, and Iraq totally shut down its oil ports.

On the flipside, Saudi Arabia has dramatically ramped up throughput of their pipeline to the Red Sea, potentially freeing up another net new ~6 million barrels per day.

In response to oil flows out of the Gulf grinding to a trickle and sustained pressure on prices, the International Energy Agency said its member countries will release a record 400 million barrels from global reserves “on a timeframe that is appropriate.” At the same time, the White House indicated the US will release over 170 million barrels from the US SPR, which would push the reserve to its lowest level since it was established.

President Trump also announced a massive new $300 billion oil refinery project in Texas, though this is unlikely to help matters before midterms. However, reports this week indicated the President is preparing to suspend the Jones Act, which would allow foreign tankers to bring in more supply for US refiners.

At one point in the week, Iran apparently indicated that China had reached out to discuss a ceasefire, which is kind of an interesting non-sequitur for the narrative that China holds all the geopolitical cards.

Either way, Iran later said a negotiation is off the table for now, and tanker data suggest Iran has continued to send oil to China through the Strait – though so far it looks like the total shipped is about half a day’s oil consumption in China, and in any case there’s a decent argument that this kind of selective blockade may not matter regardless.

As it relates to the real question on everyone’s mind, the US has so far refused requests to escort tankers through the embattled Strait, and there are basically two schools of thought on this fact in the mainstream press: those that think this suggests the US military is a paper tiger incapable of securing the Strait, and those that think the US may actually want the passage to remain closed for asymmetric geopolitical leverage. For what it’s worth, the President said this week that keeping the Strait open “really pertains more to China than to us.”

But Secretary of War Pete Hegseth suggested that both camps should calm down, as we “don’t need to worry about” the Strait (even as the Pentagon moves another 5,000 troops into position around the Middle East).

Perhaps one reason Hegseth is so unruffled is that, per the President, the US may just “take over” the Strait, a plan that was possibly given a little more credence on Friday evening when the US, to quote the Orange Man, “obliterated” all military installations on Kharg Island, a key structural shipping hub in the area (though some experts argue taking Kharg wouldn’t be enough to clear the logjam).

Noted Adult in the Room and Amateur Pugilist Scott Bessent said, regardless of the posturing, the US will escort vessels through the Strait as soon as militarily possible, and – despite all appearances – the administration has been planning for this reality for months.

Most notably for all the bondholders out there, Bessent said in that same interview that there is no conceivable price to this conflict that would make him see it as “unaffordable.”

That comment brings us to the real pivot point in this whole thing, which is how well sovereign debt markets behave as the conflict drags on and keeps oil prices elevated. To that point, the US 10-year Treasury yield nearly touched 4.3% this week after taking back a 3-handle just a couple weeks ago.

This is not yet true breakout territory as it’s basically just the prior local top from early this year, but the lack of a “flight to safety” bid in the world’s “risk-free” asset continues to be notable, as does swiftly rising bond volatility, with the MOVE Index ticking back to post-Liberation Day highs.

Perhaps more notably in the near-term, European debt continues to get smoked, with both 10-year German bunds and French OATs reaching levels not seen since the Eurozone crisis of the early 2010s. In our view, global sovereign yields are among the most important KPIs to watch over the coming weeks as and if the Sparkling Kerfuffle in Iran escalates into an acknowledged war, potentially driving both material fiscal strain on over-levered sovereigns and a true “oil shock” that keeps commodity prices inflated for the medium term.

At the same time, the DXY Index broke the 100 level and moved to its highest reading since May 2025 as uncertainty and spiking rates drove a rush for dollars. The USDJPY, a key component of the DXY basket, moved back to just under 160, nearly a 40-year high and above the level that triggered January’s well-publicized US rate check.

With all eyes on the Persian Gulf, Senator Holden Bloodfeast hinted that Cuba is up next on the administration’s regime change shortlist, though other reports suggested this may take the form of an “off-ramp” deal for the Castro family rather than another Saturday morning visit from Delta Force.

Colombia may also be setting up for a cozier relationship with the Trump administration, as anti-cartel hardliner Paloma Valencia won a much larger than expected share of a key primary vote this week. Valencia has openly discussed wanting to strengthen ties with Washington.

Elsewhere, various elements of the simmering global trade war continued to escalate, as the dispute between China and semiconductor manufacturer Nexperia – which is headquartered in the Netherlands but owned by a Chinese firm and was briefly seized by the Dutch government last fall – heated up again, potentially tightening global chip markets further.

Just as notably, the latest trade data showed that Chinese exports into Europe surged both last year and for the first two months of this year, as the export-heavy economy rerouted output away from the US and to other developed markets, which may put an unwelcome strain on the already struggling European industrial base.

Domestically, the US launched Section 301 trade probes into 60 countries, laying the legal groundwork for replacement of IEEPA tariffs that were recently overturned by the Supreme Court.

The private credit complex continued to take more lumps this week, as Cliffwater and Morgan Stanley both capped withdrawals out of large funds (with $33 billion and $8 billion of AUM, respectively). The Cliffwater fund was hit particularly hard, with investors reportedly seeking to redeem 14% of fund assets.

Saba Capital launched a tender offer at a 35% discount for shares of the Blue Owl fund that made headlines by closing down withdrawals and pivoting to a return of capital model last month (though the head of Saba says he remains bullish on many of the platforms, including Blue Owl itself).

The CEO of ServiceNow, one of the largest publicly traded enterprise software companies, also didn’t do the complex any favors with comments this week that agentic AI could drive new graduate unemployment “easily into the mid-30s” over the next couple of years, potentially portending major headwinds for sectors where private funds are overweight.

On the broader macro front, the latest CPI reading printed in line with consensus at 2.4%, with Core CPI putting in its lowest level since 2021. GDP growth figures for Q4, meanwhile, were revised down from an already weak initial print to just 0.7%.

The US federal deficit topped $1 trillion for the first five months of the year, an annualized pace of well over $2 trillion (though we’ll see how tax season affects the trajectory). This five-month tally was down 12% Y/Y, but it also still has yet to lap the benefit of tariffs (which didn’t begin taking effect until last spring).

Strategy’s STRC product extended its multi-week streak of holding the $100 par level up until Friday’s ex-dividend date, when it fell slightly below par. MSTR acquired ~5,300 bitcoin with STRC proceeds in the prior week and likely more than doubled that this past week. The company has now purchased over $6 billion of bitcoin in Q1 alone vs just $176 million in all of 2022.

Regulatory Update

Amid recent banking system wins for some crypto exchanges, US banking lobbyists are reportedly weighing a lawsuit against the OCC to prevent any more such licensing.

On a related note, the Federal Reserve announced it will initiate a public comment period on Basel capital rules that would apply a massive negative risk-weighting to bitcoin.

More encouragingly, a new Treasury report to Congress explicitly acknowledged legal and legitimate uses of digital asset privacy technologies like mixers, a substantial shift in tone relative to much of the past decade.

However, the Southern District of New York also filed this week for a retrial of Tornado Cash developer Roman Storm following last year’s lawsuit that ended in a hung jury.

The National Bank of Kazakhstan announced plans to shift up to $350 million from its gold reserves to investments tied to bitcoin and other digital assets.

Noteworthy

The bitcoin network mined its 20 millionth coin this week, leaving just 1 million new bitcoin to be issued over the course of the next ~114 years.

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

We can dive into this perspective using some fundamental principles of accounting. Every public company operates within a capital structure that markets assess with precision. Equity forms the junior-most layer, bearing the highest risk as the residual interest that absorbs uncertainty and embodies management’s credibility. Debt sits above, as senior claims defined by contractual obligations, enjoying priority in repayment. A company’s equity functions as its currency. When executives over-leverage or dilute shares irresponsibly, the market does not lodge formal objections. The market simply adjusts prices. Capital flows toward more competently managed opportunities. This is not theoretical abstraction but the essential operation of markets, where credibility is hard-won and price discovery acts as the impartial regulator.

Applying this framework to nation-states reveals profound implications. A government’s capital structure mirrors the hierarchy already defined but with currency functioning as the junior-most equity tranche. This tranche absorbs the sovereign’s variable claims on fiscal responsibility, growth, and security, all of which are ultimately reflected in the market’s adjustment of purchasing power in the nominal unit. The government’s bonds are senior debt above, secured by its creditworthiness (order and taxing ability). But an inherent distortion persists in plain sight: sovereign debt is settled in sovereign currency. This flaw is essentially a Payment-In-Kind (PIK) system, whereby senior creditors can be serviced through the dilution of junior equity holders. When debt accumulation exceeds productivity gains, the facade of seniority crumbles. Creditors obtain full nominal repayment, but the real value of that repayment (purchasing power) erodes. Inflation is a byproduct serving as the veil for fundamental economic vulnerabilities.

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History abounds with efforts to address this flaw. A golden path was paved as a durable safeguard providing a physical, auditable restraint on sovereign overreach. However, its very materiality proved its undoing: too cumbersome to handle and verify at scale, it demanded centralized custodians and thereby laid itself open to appropriation. When gold’s limitations clashed with state imperatives, authorities intervened decisively: a litany of examples, including the USA’s most recent via executive orders in 1933, the closure of the gold window in 1971, and finally the flood of ad-hoc liquidity facilities post 2008. The enduring lesson is that any constraint vulnerable to suspension in crises is illusory. Savers found themselves exposed, dependent on issuers’ restraint and the slow pace of bond market signals. Lagging indicators on what had already happened.

Bitcoin could impose accountability on sovereign mismanagement by functioning as a relentless real-time market enforcer, disciplining irresponsibility by allowing for instantaneous, global capital reallocation. Unlike traditional assets susceptible to regulatory capture or confiscation, bitcoin’s decentralized protocol remains impervious to unilateral intervention. Thereby ensuring poor governance (manifested in unchecked monetary policy, unsustainable fiscal deficits, or excessive household/personal indebtedness) triggers immediate and measurable consequences. Capital does not have to wait for diplomatic rebukes or credit rating downgrades. Debasement-driven value transfer has already begun to diffuse and crowd into traditional assets (stocks, real estate, and commodities) thereby concentrating and overexposing holders to geographic, political, and execution risks. Now, any allocator can instead migrate to bitcoin’s verifiable finite scarcity, evading the offending currency’s value erosion and compelling policymakers to confront their offenses before the breaking point. This mechanism can transmute bad behavior from a hidden liability into a public current affair, where individuals within markets, rather than bond vigilantes and regulatory mandates, impose corrective pressure, fostering a global ecosystem where credibility is not assumed but continuously earned.

Complementing bitcoin’s role as the capped neutral layer, stablecoins have emerged as novel digital mechanisms for onshoring eurodollars by digitizing and repatriating the vast offshore dollar liquidity that has long existed beyond the U.S.’s borders. Eurodollars (U.S. dollar-denominated deposits held in foreign banks) have enabled global dollar circulation outside of U.S. control, satisfying dollar demand and offering regulatory arbitrage while remaining in a fragmented and opaque market. Tokens pegged to USD, such as USDC or USDT, function as modern digital eurodollars: they enable seamless, borderless transfers of dollar-denominated value from any digital client. These stablecoin issuers effectively repatriate offshore eurodollar reserves into programmable, digital pipes ring-fenced within the purview of U.S. Treasury-backed regulation, enabling the further expansion of U.S. debt. Without physical branches, vaults, or heavy legacy overhead, these issuers slash distribution costs to near-zero, providing channels for billions in remittances, trade settlements, and savings ability for global markets. This broadens voluntary access to the U.S.’s equity tranche, accelerates global economic integration, and can reinforce U.S. dollar hegemony. Hegemony not through imperial imposition, but by making offshore dollar liquidity more compliant, transparent, and demand-generating for U.S. debt in a digital era.

Bitcoin sits atop the stack and counterweights with pure choice unlike manipulable debt instruments that sovereigns can endlessly issue, refinance, or sweeten with flexible incentives. This unrelenting competitive pressure of choice produces a negative feedback loop that can induce an equilibrium. Sovereigns and corporations must continually enhance their debt and equity offerings through superior yields, geopolitical protections, exclusive trade deals, regulatory favors, or other dynamic perks to stop capital from migrating to an elegantly simple alternative. A simple solution creating a market, not a one-way-function as transacting in bitcoin offers none of the active externalities that dominant powers deploy through alliances, military umbrellas, or market privileges. Nevertheless, its open-source foundation, simple design, unique balance of incentives, and lack of any prior or future claims keep it flexible. Proven market demand can spawn integrations such as long-term dual-collateral loans and BitBonds that bridge bitcoin with real-world assets and governments, affording competition while isolating geographical, political, or executive risks. These innovations, along with yield mechanisms and governance tools, can be added without ever diluting bitcoin’s finite scarcity or resistance to unilateral control.

In this adjusted framework we see bitcoin completing the transformation from static electricity to electrical current. Bitcoin serves as the ultimate adjudicator of trust and scarce value, while stablecoins operate as the scalable pipelines for sovereign currency distribution. Together they form a single, self-correcting system: stablecoins broaden access and lower friction, while bitcoin’s fixed scarcity ensures that no issuer can escape market discipline indefinitely. They compel sovereigns to compete on genuine merit rather than coercion or monopoly, dismantling entrenched inefficiencies and unlocking unprecedented potential. As credibility trends toward becoming currency, markets will not simply reflect realities; they will shape them, granting innovation and fiscal prudence a privileged seat in the sovereign arena.

All professional Situation Monitors (and the amateurs who just do it for the love of the game) had to become military, maritime, and munitions experts this week, as the conflict between the US / Israel and Iran escalated into a broader regional disruption. Throughout the week, Iran launched missiles and drone strikes at oil and shipping infrastructure operated by various Persian Gulf neighbors (as well as some AWS data centers), and most importantly threatened an effective blockade of the Strait of Hormuz, a critical shipping chokepoint for roughly 20% of the world’s liquid petroleum products. In conjunction with rhetoric from the Trump administration that the fight won’t be done until the US wins a complete and unconditional surrender, as well as broad cancellation of maritime insurance contracts on Hormuz routes, the escalating volatility sent Gulf oil shipments to near-zero and oil prices through the roof, with WTI and Brent both finishing the week up 35% for the largest single-week moves in over 40 years. Everything you read on this conflict (including the bloviating in this particular rag) should be taken with the massive grain of salt appropriate for the Fog of War that characterizes the early days of fighting, including, per our duly elected officials, whether this actually constitutes a war at all. That said, the White House’s new munitions production commitments from major defense contractors, reported interest in arming regional rebel groups, and quiet incursion into Ecuador this week all certainly point toward the potential for extended kinetic conflict around the world in an attempt to solidify US hegemony in an increasingly fractured power landscape.

Against that bumpy backdrop, US Treasuries – ostensibly the bedrock of the global capital stack and the core safe haven asset for times like these – sold off throughout the week, with the 10-year climbing to nearly 4.2% after reclaiming a 3-handle late last week. The move so far has basically just been a reversal of recent gains, so it’s too soon to make any strong calls, but the lack of an incremental bid is nevertheless notable given the events of this week are almost certainly worse than consensus from just a few weeks ago. Meanwhile, the US private markets landscape is continuing to show more cracks in the foundation, as both Blackstone and BlackRock saw significant redemptions out of some of the largest private credit funds in the world, and major alternative asset managers extended their brutal slump, with key blue chip names in the space now down over 40% off last summer’s highs. Finally, the latest jobs numbers pointed to unexpected softness in the labor market, and this weakness notably didn’t include any observable impact from the wave of AI advancements that has sent shockwaves through markets (which either suggests everyone needs to calm down or that you’re already seeing weakness even before the hurricane makes landfall). As humble bitcoiners, we won’t pretend to have special insight into how policymakers and geopolitical lever-pullers might be viewing this confluence of crosswinds, but we’ll just say to anyone planning on a reduction in the size of the Fed balance sheet over the next few years with all this going on:

Selected Portfolio News

Strike announced it has secured a New York BitLicense and is now live in the Empire State, making it one of just a few bitcoin companies to be able to fully service New Yorkers:

Strike also announced the rollout of a new Line of Credit product to give users a more flexible way to tap into their bitcoin for dollar liquidity:

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.

Media

Strike Founder and CEO Jack Mallers gave a compact talk outlining bitcoin’s value proposition at this year’s BLISS summit.

Ten31 Managing Partner Matt Odell was featured as a judge on the latest episode of Cypher Tank.

AnchorWatch Co-Founder and COO Becca Rubenfeld appeared on the Bitcoin Archive podcast to discuss the growing intersection of bitcoin and insurance, and much more.

MapleAI Co-Founder Mark Suman joined TFTC to dig into the latest advances in agentic AI and how to harness them securely.

Market Updates

As the world grappled with the US’s first new Military Action International Kerfuffle Gentleman’s Dust-up war since pulling out of Afghanistan in 2021, President Trump kicked off the week by trying to assure everyone that the “Mission Accomplished” banners will fly in four weeks or less.

Of course, like any good crypto influencer telling you how the price could either go higher or lower (DYOR, NFA), Trump also suggested the conflict could go on much longer, and late in the week said we’re actually not going to be done until we get an “unconditional surrender” from the Iranian regime.

The shorter end of the President’s timeline seemed progressively less likely as the week went on, as Iran did its best to extend the conflict across the Persian Gulf, including strikes against Saudi refineries and a liquefied natural gas hub in Qatar, while threatening to shut down the Strait of Hormuz, a key shipping chokepoint in a region that supplies ~20% of the world’s total liquid petroleum products.

Fears of Iranian attacks sent traffic through this critical passage down to essentially zero for most of the week, as leading maritime insurers cancelled policies on vessels in the Strait, and shipping giant Maersk suspended multiple services in response to the volatility.

The Trump administration rushed to announce a $20 billion reinsurance program to get traffic through the channel moving again, and the White House further vowed to use the Navy to defend oil shipments in the area (though it’s unclear if the US has the capacity to cash that check).

In an attempt to gain the upper hand, the White House is also reportedly considering arming a group of moderate Kurdish rebels (change the channel, this one’s a re-run), perhaps with the critical “Exquisite Class” munitions whose production American defense companies agreed to quadruple this week.

For what it’s worth, the New York Times reported mid-week that Iran has signaled willingness to come to terms to end the conflict, though Iranian leaders publicly suggested they’re not interested in negotiating. Meanwhile, Iran’s President vowed on Friday night to halt attacks on neighboring countries, and some reports suggest steep declines in the pace of Iranian missile launches during the week, potentially indicating dwindling stockpiles.

Just for good measure, the US also quietly launched an “anti-drug trafficking” operation in Ecuador, which aligns with our ongoing thesis that the White House wasn’t just bluffing when it released its National Security Strategy memo late last year.

We have no alpha on how long the Iranian conflict might last, but it’s worth noting a few second derivatives of the events so far, including the downstream impacts of disruptions in Qatar on China’s semiconductor self-sufficiency ambitions and, more importantly, a potential blockade of a region that supplies some 45% of Chinese oil. Our tinfoil hats are at the dry cleaners, but we can imagine strategists at the Pentagon considering these asymmetrically disruptive impacts on China before making the decision to launch the White House’s latest Leeroy Jenkins campaign.

Whatever the geopolitical and military implications, oil prices ripped higher throughout the week, with WTI spiking to $91, its highest level in several years and good for the largest weekly move since 1983. With prices already up 50% YTD, Qatar’s energy minister suggested the pain could get much worse, predicting $150 per barrel in the next few weeks if the conflict isn’t resolved.

US Secretary of State and future Viceroy of Cuba Marco Rubio indicated the US will institute various measures to contain the impacts of the oil price shock, while Fed Chair Silver Medalist Kevin Hassett assured the public that the White House has a whole flow chart to manage the situation. The administration was kind enough to provide Ten31 with an exclusive preview of what these measures might look like.

Trump, for his part, did his best Ivan Drago impression to project relative indifference to gas price fluctuations, noting “if they rise, they rise.”

Secretary of the Interior Doug Burgum also suggested the administration is “considering all options” to bring down oil prices, and Burgum notably flew to Venezuela this week to work on deals for American oil companies to expand operations in the country.

Burgum’s trip also included an interesting deal for the US to buy hundreds of millions of dollars in gold from a state-owned Venezuela miner, as well as discussions about American mining companies taking advantage of Venezuela’s rich (but cartel-controlled) critical mineral reserves.

Across the pond, Treasury Secretary Scott Bessent said the US may move to reduce sanctions on Russian oil shipments to help mitigate global price pressure.

Back in the US, the Department of Justice released a memo laying the groundwork for President Trump to invoke the Defense Production Act to restart stalled offshore oil drilling in California despite local permitting and regulatory pushback.

But despite the many stopgap solutions trotted out by the White House, US Treasury yields ripped higher all week on the possibility of sustained pressure in the world’s key energy input. The 10-year gave back all recent gains, touching as high as 4.17% on the week after briefly dipping below 4% just before war headlines hit the wire. It’s too early to make any definitive calls, but we think it’s fair to say this is interesting price action for the world’s premier safe haven asset during a time of escalating uncertainty.

US stock indices initially couldn’t figure out whether the potential start of World War III was bullish or not, as the S&P closed in the green on Monday, but by Friday the combination of $150 oil fears and very weak jobs data pushed equity indices firmly negative for the week.

The South Korean Kospi Index was a little more decisive, dropping 12% on Tuesday for its worst single-day drawdown in history.

USD asset markets may soon also need to contend with second-order disruptions from chaos in the Middle East, as the Financial Times reported that the major Gulf States “could review overseas investment commitments” – including the massive planned investments the US announced to much fanfare last year – to cope with financial strains from the war. That said, Gulf State governments are reportedly encouraging the Trump administration to stay the course in Iran.

The volatile environment piled onto what has already been a tough run for private markets, as Blackstone announced this week that it had allowed investors in BCRED, the world’s largest private credit fund with more than $80 billion of AUM, to withdraw almost 8% of fund assets.

Similarly, BlackRock honored withdrawals from its $25 billion HPS Corporate Lending fund this week, but only up to the quarterly maximum threshold of 5%. Total redemption requests came in at over 9% of fund assets, marking the first time the fund has seen requests above its quarterly maximum.

Finally, the collapse of MFS in the UK, which has reportedly resulted in a shortfall of over $1 billion to creditors, added to the growing chorus of concerns about hidden “cockroaches” in credit markets. All these headlines put continued pressure on the publicly traded alternative asset manager complex, which extended its nasty recent drawdown all week.

More positively, the ISM Manufacturing PMI reading came in above 50 for the second month in a row, suggesting January’s strong reading wasn’t just the result of seasonality. However, the latest Non-Farm Payrolls data for February came in well below expectations and down M/M as the unemployment rate ticked up to 4.4%, dampening excitement about the fundamental macro backdrop.

Former Fed Governor and rate cuts connoisseur Stephen Miran immediately took to CNBC to reiterate the jobs print strengthens the case for near-term cuts, and San Francisco Fed chief Mary Daly admitted this data point complicates the picture for the Fed.

Lest you forget about the US trade balance, Secretary Bessent reminded everyone that 15% global tariffs will take effect this week, and he expects duties to return to their prior levels by August. At the same time, Bessent is reportedly planning to lean on China to buy more oil from the US and deemphasize its reliance on Iran, a demand that may have a little more bite after this week.

Amid the chaos, bitcoin broke above the $70,000 level and climbed to nearly $74,000 before retracing to the high $60k range on Friday’s broad market selloff. We have no crystal ball on near-term price action, but we do think the orange coin chopping in a range against a backdrop of broad selloffs elsewhere is somewhat reminiscent of the post-Liberation Day moves last year.

Strategy’s STRC preferred stock (which is intended to approximate the characteristics of a money market fund, targeting face value stability while paying a variable rate) held the key $100 level the entire week, likely enabling purchases of ~4,000 bitcoin, above the week’s total newly mined supply.

Regulatory Update

Kraken became the first US crypto exchange to score a Federal Reserve master account, giving the company direct access to the Fed’s core settlement system. The exchange is limited to a “skinny account,” meaning it can’t access Fed services like the discount window, but the headline is nevertheless a major milestone for digital asset companies’ integration with traditional banking rails.

President Trump interestingly took time out of his Age of Empires session this week to fire off a Truth Social post reiterating that Congress needs to pass the CLARITY Act as soon as possible. The post seemed to suggest that Trump views incumbent banks (and not the crypto lobby) as the limiting factor in the process.

Wyoming Senator Cynthia Lummis reopened her push for a de minimis crypto tax exemption, this time for purchases under $300 with an annual cap of $5,000.

Noteworthy

The Bitcoin Policy Institute published a new study showing that AI agents generally favor bitcoin relative to all available monetary options, with overwhelming preference for it as a store of value. Stablecoins edged out bitcoin for the everyday payments use case.

But Ray Dalio reminded us this week that there’s only one gold, and central banks will never buy bitcoin because of privacy and quantum computing.

Fidelity published a report arguing that evidence increasingly favors the end of the traditional “Four Year Cycle” narrative for bitcoin’s price.

While this week’s soft jobs numbers did not necessarily validate fears of an imminent AI apocalypse, Anthropic released some new data quantifying the potential medium-term impact from AI advancements on a broad array of professions.

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

Another Saturday morning, another regime change strike on a key marginal producer of oil for China dangerous threat to Freedom and Democracy. Following last month’s Midnight Maduro Madness, President Trump greeted Americans this morning with news of an extensive attack on Iran coordinated alongside Israel, ostensibly to “defend the American people by eliminating imminent threats” from the current regime. The President explicitly encouraged the Iranian people to “take over the government” in the wake of the US’s attacks and expressed willingness to ramp up involvement to a degree that might include American casualties, a fairly radical shift from the “no new wars” tenor of Trump’s first term (though early reports suggest much of the country’s key leadership may have already been eliminated). While our security clearance is too low to grant us much insight on all the motivations driving what seems to be a politically unpopular military excursion, we have to imagine it doesn’t hurt that the successful installation of a US-friendly Iranian government – which, if the history of regime change wars tells us anything, should be a total walk in the park – would potentially boost American leverage in the ongoing soft decoupling from China.

The Pentagon also made stateside headlines this week through a highly public and acrimonious conflict with frontier AI lab Anthropic over the company’s attempts to place “safety” controls on what its models and tools licensed to the DoW will and won’t do. This press release war seemed to conclude with the White House directing the Pentagon to cease use of Anthropic products, but we think these two headlines are more intertwined than consensus may appreciate, as they jointly point in the same direction of the US government aggressively moving to reassert wartime control over (and potentially expand the definition of) its sphere of influence. Against a backdrop where Substack AI Doomposting can send stocks of the biggest companies in the world into freefall; where tech companies are beginning to tout benefits from large AI-driven cost rationalizations; and where the Executive Branch is consistently maneuvering to both subtly and kinetically undermine its main geopolitical rival, this week’s Hegseth/Amodei showdown sets up an interesting question of who actually has sovereignty over what increasingly looks like incredibly powerful, society-altering technology. The Trump administration’s attitude toward outright industrial policy and direct equity stakes in massive companies over the past year suggests to us that if you’re building a superweapon in US borders – and that weapon happens to be, for now, the country’s main technological edge against a rival that produces basically everything else – you shouldn’t be surprised when the US government declares you the junior partner. At the risk of beating a dead horse, we continue to believe these secular megatrends have significant implications for globally accessible liquid assets that can be held without counterparty risk.

Selected Portfolio News

AnchorWatch launched a wide array of customizable Vault options – including multi-institution support soon – as well as optional insurance policies, Coldcard integrations, and more:

Fold announced balance sheet updates to simplify its capital structure, enhance operational flexibility, and reduce potential dilution:

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.

Media

Maple AI Co-Founder Mark Suman joined What Bitcoin Did to discuss the rapid advancements in the AI landscape.

Ten31 Advisor and Zaprite Head of Business Development Parker Lewis appeared on What Bitcoin Did as well to discuss bitcoin’s role in the changing global monetary order.

Market Updates

The White House got everyone’s weekend off to a nice start with another Saturday morning dictator deposition, announcing overnight that the US military has initiated major strikes on Iran. President Trump’s address to the nation suggested the attacks are intended to defend the US against “imminent threats,” though after the ostensible total destruction of the country’s nuclear program last summer, it’s not entirely clear what those threats might be.

That said, we’d keep an eye on Iran’s status as a key marginal supplier of oil for China, as the country’s independent refineries reportedly turned to Iran to backfill some supply in the wake of last month’s Maduro ouster from Venezuela.

The headlines weren’t much more encouraging earlier in the week, as independent research firm Citrini posted a widely circulated report highlighting the potential for massive disruption to wide swaths of the economy from rapid advancements in AI.

While the report largely highlighted scenarios that terminally online AI maxis have been ranting about for years, and various Wall Street shops quickly responded with obligatory takedown pieces, the report was apparently fresh enough to send stocks from Blackstone to DoorDash to Visa reeling on Monday morning.

Fed Governor Chris Waller shrugged off the concerns, arguing that the risks of AI to the labor market are overstated, which is very comforting coming from the institution that gave us “subprime is contained.” His colleague Lisa Cook, meanwhile, suggested she’s not so sure.

It was a bit of an awkward week, then, for fintech giant Block to announce it will cut its workforce by nearly 50% thanks to productivity gains delivered by AI tools. This announcement sent the stock up nearly 25%, which will no doubt give other executives with large org structures something to think about.

To be fair, Block CEO Jack Dorsey has freely admitted to overhiring in recent years, and the company’s headcount still remains well above its pre-COVID hiring spree, so a chunk of this reduction is likely just standard right-sizing, but we would fade the idea that that’s the entirety of the explanation.

As another data point in the same direction, spending on US data center construction officially surpassed spending on new office construction after clearly trending in that direction for several years.

Meanwhile, US Senator Brian Schatz introduced two new AI bills that would tax AI revenues to fund retraining programs and, perhaps more significantly, invoke an automatic “whole government response” if unemployment climbs above 5.5% for two quarters. It’s still not necessarily our base case, but we’d argue kneejerk UBI in response to rapid AI advancements is definitively still not priced in (to anything).

Interestingly, despite the market increasingly reckoning with the potential for massive disruptions from these themes, AI lynchpin Nvidia sold off hard despite very strong earnings this week.

All the consternation pushed the US 10-year yield down below 4% for the first time since October (though we’ll see how that move holds up Monday morning if Iran successfully closes the Strait of Hormuz) while handing bank stocks their worst session since Liberation Day on growing concerns over the health of private credit in an AI-disrupted world.

All the upheaval was the last thing the illiquid side of the market needed, as Bain said this week that the ongoing private equity dealmaking dry spell is now worse than the trough of 2008.

Despite the tremors, Chicago Fed President Austan Goolsbee suggested the central bank should keep rates on hold for now as inflation remains too far above target. Goolsbee’s case got another data point in its favor late in the week, as January’s Producer Price Index reading came in substantially above expectations at +0.8% M/M.

For what it’s worth, though, Bessent / Warsh mentor Stan Druckenmiller said in an interview this week that he expects the Fed is still likely to cut rates, alongside a call for disinflationary growth. The Soros protégé also suggested he remains bearish on the dollar as trade imbalances correct.

Overseas, recently elected Japanese Prime Minister (and former Abenomics acolyte) Sanae Takaichi has reportedly started taking a “tougher stance” with the Bank of Japan in an effort to discourage further rate hikes.

Elsewhere in Japanese financial plumbing, new reports this week indicated that January’s well-publicized Fed “rate check” on the USDJPY cross was initiated by Treasury Secretary Scott Bessent, and not at the request of the Japanese.

On the tariff front, Bessent said that Treasury’s tariff revenue projections for the year remain unchanged despite the Trump administration’s Supreme Court loss last week, though he admitted that the $175 billion in cumulative tariff revenue thus far will likely never hit consumer wallets given the many companies suing for refunds.

Jane Street, the quant trading giant that has proven to be everyone’s favorite boogeyman in recent months, was hit with an insider trading lawsuit this week regarding the company’s alleged involvement in 2022’s massive Terra / Luna unwind.

Denizens of various Fintwit subcultures celebrated the news as a sign that their preferred bags can now rise uninhibited by supposed manipulations like the “10am slam.” We’ll just say we have our doubts.

Saturday’s Iran headlines predictably tanked bitcoin’s price, though as of this writing the orange coin has recovered to $65,000 following a week that saw over $1 billion in ETF inflows. Despite the drawdown since last fall, sentiment in the gutter, and ongoing global uncertainty, cumulative net flows into bitcoin ETFs have declined only ~12% from their October all-time highs.

As bitcoin ranges between $60-70,000, more than half of bitcoin supply is now being held at a loss, a common condition for finding a bottom during prior bear markets. Meanwhile, essentially every on-chain mean reversion model now points to the same conclusion.

Morgan Stanley filed for a de novo national bank charter geared toward providing direct custody of bitcoin and other digital assets for clients, the latest headline out of traditional finance that looks nothing like what we were seeing the last time bitcoin took a 50% drawdown.

Regulatory Update

Missouri advanced its latest bitcoin reserve bill, while Indiana passed a bill to allow public retirement plans to add exposure to bitcoin ETFs.

Noteworthy

Pseudonymous bitcoin and eCash developer Calle launched Numopay, a free open source POS app enabling NFC-based tap-to-pay capabilities with any bitcoin or eCash wallet.

Travel

• Bitcoin Jawn, Philadelphia, March 2

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

Anyone who’s read a Steve Jobs biography or watched one of his many biopics probably remembers the famous concept of the “Reality Distortion Field” (RDF), whereby the Apple founder’s charisma (or abusive personality, depending on your source) would lead those in his orbit to ignore conventional assumptions about real-world constraints and push through to complete a task anyone else would dismiss as impossible. We’d argue most people have their own RDF, but it typically runs in the opposite direction – a kind of magical thinking that bends perception of reality to flatter preconceived notions – and we think this week showed a few examples of the RDF’s influence on legacy institutions, which seem to be under the impression this is still 1992. Most notably, the Supreme Court struck down the Trump administration’s unilaterally imposed “emergency” tariffs, essentially the lynchpin of the White House’s entire economic policy agenda, prompting many RDF-plagued opponents of these tariffs to immediately celebrate Trump’s apparent defeat. However, the President quickly made clear that the tariffs will be imposed in some other way, and it indeed looks like he has all the legal firepower he needs to at least keep the matter alive for years to come, largely thanks to a half-century of both parties enthusiastically vesting ever more power in an increasingly unaccountable administrative state. The institutional RDF would suggest this is the end of the line for tariffs, but we think the past year clearly shows the die has been cast on the global economic reordering, and – for better or worse – we’re not reverting to pre-Liberation Day norms just because of procedural disagreements on which statute technically provides the necessary window dressing.

The institutional RDF also seemed to be on display at the Federal Reserve this week, as the minutes from the latest FOMC meeting continued to point to a divided Fed still dithering about the minutiae of how it messages the speed of rate cuts, with some officials even arguing for forward guidance toward the potential for rate hikes. While Fed officials wring their hands and prudently rearrange deck chairs, the Treasury Department appears to already be in the process of writing the next chapter, as Treasury’s latest quarterly refunding documents clearly assume an increasingly accommodative Fed and greater coordination with the central bank to manage the government’s ballooning funding needs. At the end of the day, when a sovereign – particularly the most powerful sovereign in the world – feels itself to be existentially threatened by a rival or needs dependable funding for its strategic priorities, history suggests that no amount of institutional RDF will get in its way. We’re not taking a particular view one way or the other on the various goals of the administration, but we do see the decades-old assumptions of Wall Street and K Street (clean separation of powers, effective checks and balances, Fed independence) to be increasingly at odds with the realities of the present moment, and we’d argue the breakdown of those frameworks has significant implications for both neutral reserve assets and, more importantly, technologies like bitcoin that can provide a permissionless bulwark for individual liberties in a time of rapidly shifting norms.

Selected Portfolio News

Strike launched Agent Playground, an open source reference template for portable AI agent environments:

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.

Media

Ten31 Managing Partner Marty Bent joined Bram Kanstein and Onramp to discuss the latest in bitcoin, AI, regulation, and more.

Market Updates

Though the headline dropped in the middle of a Friday, the biggest news of the week was the Supreme Court’s long-awaited decision on President Donald Trump’s sweeping tariffs. Despite a bench of justices optically tilted in Trump’s favor, the high court ruled against the current incarnation of the tariffs in a 6-3 decision.

Taken at face value, this decision undermines one of the key components of the White House’s economic agenda; however, President Trump quickly emphasized that his team has many other fallback options in place and suggested he may roll out “even stronger” tariffs in the near term.

While the Supreme Court threw a wrench into the White House’s trade agenda and the President vowed to push forward, the latest trade data released this week showed a significant jump in the US’s trade deficit in December, back to levels that look much closer to the prior few yeras. Overall, the 2025 trade deficit came in basically in line with 2024, though a variety of early-year pull-forwards and the impact of gold flows complicate the picture.

Potentially complicating another important pillar of the President’s platform, the minutes from the latest FOMC meeting continued to point to a divided Fed and an uncertain path for further benchmark rate cuts from here, with some officials considering new “two-sided language” to leave open the possibility of rate hikes.

That said, as part of its Quarterly Refunding Announcement, the Treasury Department released its latest TBAC presentation, which explicitly highlights a strategy of using the Fed’s new Reserve Management Purchase program to shift more debt issuance toward short-end bills and reduce incremental supply of duration.

The data also seem to assume that, rather than being just a temporary measure used to stabilize bank reserves, RMP purchases will continue at their current levels (close to $500bn annually; see page 20) indefinitely. While not yet directly comparable to QE, these data points hint at a continuing shift to subordination of independent monetary policy to the fiscal needs of the government.

The Fed minutes also highlighted some general concerns with “vulnerabilities” in the private credit complex, which potentially got some additional validation this week when large alternative asset manager Blue Owl Capital permanently halted redemptions on one of its funds targeted at retail investors.

Blue Owl was able to sell off $1.4 billion in assets at nearly 100 cents on the dollar to meet withdrawal requests, so it’s too soon to say this is The Big One^TM, but it bears monitoring given ongoing fragility in parts of the illiquid credit complex, highlighted elsewhere this week by a sharp uptick in distressed loans linked to software companies.

On a similar note, the Wall Street Journal ran a feature on commercial real estate lenders increasingly moving into the foreclosure stage of non-performing loans rather than playing the “extend and pretend” game any longer, as delinquencies in many verticals of this market continue to increase to new multi-decade highs. Notably, less than half of the $100 billion of securitized CRE loans coming due this year are expected to make repayment at maturity (down from 75-80% in 2024 / 25).

Fed Governor Michelle Bowman introduced a new proposal that would reduce bank capital requirements for originating mortgages, the latest sign of bank regulators’ desire to incentivize more credit creation out of the traditional banking system.

Overseas, the US military continued to amass considerable military assets in the vicinity of Iran, with Vice President JD Vance indicating that Iran has yet to address key American demands.

For his part, President Trump suggested he’s considering a “limited strike” against the country. He also indicated he will move forward with new UAP disclosure, which pretty much seals the deal that we’re going to war.

Potentially buried under other headlines this week was the GDP report for Q4, which showed growth of only 1.4%, well below consensus estimates for 2.5% and juuuust a bit outside of the administration’s near-term target of 10-20%. A chunk of this gap was driven by the quarter’s lengthy government shutdown, though the Commerce Department suggested the actual net impact “could not be quantified.”

As 13F season ramps up again, a few notable updates have started to trickle out. Most significantly, two major Abu Dhabi sovereign wealth funds materially increased their IBIT positions during the fourth quarter even as bitcoin experienced a significant drawdown.

A representative from one of the funds reiterated to Bloomberg that they view bitcoin as a “store of value comparable to gold” and a part of the fund’s long-term strategy. On the flipside, Harvard’s endowment trimmed its IBIT position during the quarter, though it remains the university’s largest publicly reported liquid position.

While bitcoin’s price has yet to recover from its February selloff, bitcoin mining network hashrate has experienced an explosive V-shaped recovery over the past few weeks, climbing firmly above 1 ZH/s again and erasing most of the YTD decline.

Regulatory Update

The Trump administration issued a March 1st deadline for a CLARITY Act compromise between the banking and digital assets industries. White House Digital Assets Advisor Patrick Witt suggested talks on the stalled legislation are progressing well and he expects to meet this deadline.

Noteworthy

River published some preview snippets of the latest refresh of its Lightning Network research, which includes some pretty impressive statistics on the steady progress of bitcoin’s main second layer.

Longtime bitcoin developer Matt Corallo highlighted some interesting conservative proposals for preparing bitcoin against future advances in quantum computing without major architectural overhauls today.

CME announced it plans to begin offering 24/7 futures trading for digital assets beginning in May of this year.

The Wall Street Journal published a feature on various countries around the world increasingly pushing to add aggressive KYC to social media platforms in the name of protecting the kids.

Travel

• OPNext, New York, Apr 16

• Bitcoin 2026, Las Vegas, Apr 27-29

After realizing en masse this week that there might actually be something to this whole AI thing after all, Portfolio Managers worldwide proceeded to trigger rolling selloffs across industries ranging from commercial real estate and trucking to ratings agencies and insurance. The carnage was no doubt driven by a lot of kneejerk shooting – perhaps best exemplified by a karaoke company driving a 20% single-day drawdown in freight forwarding stocks – and we’d guess the questions saved for later will reveal a good deal of institutional inertia and implementation frictions that will insulate legacy models for longer than some of the most galaxy-brained AI maxis may imagine (everyone would probably benefit from brushing up on their James Burnham). That said, based on our own firsthand experience using the increasingly impressive tools, it’s tough to say a real technological acceleration isn’t happening, and it’s reasonable to think that the current pace of change will leave the state of employment looking very different over the next five years.

It was a poetic week, then, for the Congressional Budget Office to release its latest 10-year fiscal projections, which show an additional $1.4 trillion cumulative deficit added relative to last year’s estimates. The CBO’s forecast – which is generally biased toward underestimating deficits anyway – accounts for recent changes like the Big Beautiful Bill, but does not incorporate any of the projected AI disruption impacts that drove investors to dump stocks all week, highlighting just how tenuous the setup is for the Treasury and Fed. To be sure, a proliferation of extremely useful AI tools could give a big lift to gross productivity (and therefore nominal GDP, and therefore tax receipts), but if that turns out to be a jobless productivity boom, how much of that flow of receipts will be eaten up by automatic stabilizers and unemployment benefits? How many new federal programs like broad re-skilling will need to be authorized to manage that transition? How might that interact with a massive (and probably still underestimated) surge in defense spending and an industrial re-shoring agenda that offsets the decades-long subsidy of just-in-time international supply chains? Amid upcoming regime change at the Fed and all the recent talk of SOMA balance sheet reductions, we expect all these questions to be top of mind in Washington’s backrooms over the coming year, perhaps explaining why Treasury Secretary Scott Bessent thought it prudent to suggest this week that the Fed won’t be reducing its balance sheet for “at least a year” as it weighs all the moving pieces.

Selected Portfolio News

Giga Energy brought its latest HPC site online:

Strike updated its loan liquidation policies to give users more flexibility during periods of volatility:

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.

Media

Ten31 Managing Partner Matt Odell was featured on the Cyphertank show.

Market Updates

The US federal budget deficit came in at $696 billion for the first four months of this fiscal year, down Y/Y thanks largely to higher tariff revenues, but still on pace for $2.1 trillion in the full year.

The Congressional Budget Office also released its latest fiscal projections for the next decade, which show a $1.4 trillion cumulative increase over the period relative to last year’s forecast. The CBO now expects “large, historically unusual” deficits of 6-7% of GDP for the next 10 years.

President Trump tried to assuage concerns over the ballooning deficit this week by suggesting that we could simply not have a deficit anymore if new Fed Chair Kevin Warsh were to aggressively lower rates (we think the long end may beg to differ here without some creativity).

The President also suggested he thinks the economy can grow 15 or 20% under new Fed leadership. With the latest Atlanta Fed GDP Now print coming in at 3.7% for Q4, Mr. Warsh may have his work cut out for him on hitting this target.

However, the latest inflation data pointed to some air cover for the Fed, as both headline and Core CPI for January were a bit below expectations and are now in the mid-2% range, even as January’s topline jobs data also came in well above consensus (just don’t look at the latest downward revision to last year’s numbers, the largest such revision since 2009).

Policymakers will also need to contend with growing issues like student loan delinquencies, which have continued to rip vertically to new all-time highs, and a sluggish housing market, where existing home sales fell by over 8% in December as part of what the National Association of Realtors labels a “new housing crisis” (in other news, the National Barbers’ Guild reported a historic national deficiency of haircuts last month).

Elsewhere, new headwinds to the budget may emerge via AI’s indirect impacts on capital gains tax receipts, as a variety of non-software sectors like commercial real estate endured violent selloffs driven by investors attempting to price the potential for broad, near-term AI disruption.

Meanwhile, UBS said it foresees increasing vulnerability in the $3.5 trillion private credit market – much of which is tied to traditional software companies – from the accelerating pace of AI improvement, with analysts forecasting up to $120 billion of defaults this year and potential for less likely but much more violent tail risks.

Amid all these crosswinds, Bloomberg notably ran a feature on Kevin Warsh’s desire for a new Fed-Treasury accord – something we’ve been flagging in this newsletter for close to a year – though it remains unclear exactly what this means in Warsh’s mind.

As a potential hint, Treasury Secretary Scott Bessent mentioned this week that – despite frequent discussion of shrinking the Fed balance sheet in the near term – the central bank is unlikely to make any such changes for “at least a year.”

Under the hood, it was also a busy week for the international chess board defining the administration’s policy options. Most notably, pro-Trump Japanese Prime Minister (and former Abenomics acolyte) Sanae Takaichi won a landslide victory after calling a snap election, while her party took a supermajority in the country’s legislature.

The US, Japan, and Europe also announced the initiation of a critical minerals pact whereby key allies will cooperate with the US to mine, process, and stockpile materials key to national defense and artificial intelligence.

President Trump is reportedly considering withdrawing from the USMCA, the North American trade agreement that replaced NAFTA in 2020 and which is due for its first renegotiation this summer, likely another move to exert leverage over Canada and Mexico.

Congress attempted to throw sand in these gears this week with a vote to roll back Trump’s tariffs on Canada specifically, though the President will likely just veto this measure. That said, other reports suggest Trump is weighing his own rollback of some steel and aluminum tariffs because, in a shocking turn of events no one could have predicted, they are driving increased prices for consumers.

Either way, we may be close to some real and potentially market-moving clarity on this overall agenda, with the Supreme Court’s next wave of rulings, which could include a decision on the constitutionality of Trump’s tariffs, to be released in the next 1-2 weeks.

China’s regulators made headlines this week by urging domestic banks to avoid and reduce US Treasury exposure, though official data already suggest exposure has been trending down for years.

Reports elsewhere suggested that Russia is exploring the opposite path by quietly preparing proposals for a new partnership with the Trump administration that would see it move back toward the dollar nexus. Russia’s central bank quickly threw cold water on this idea, and as we all know, you should never believe something until it has been officially denied.

Bitcoin’s price generally stabilized close to $70,000 for much of the week, but Blockfills – an institutional digital assets platform backed by Susquehanna that handled $60 billion of volume last year – halted withdrawals and limited trading this week. This is the first iteration of a classic bear market headline that we’ve seen this cycle, and we would be surprised if it’s the last.

Regulatory Update

Amid ongoing conflicts between the “crypto” industry and legacy banks, Secretary Bessent again reiterated his view on the importance of passing the CLARITY Act, criticizing a group of “nihilists in the industry” that prefer “no regulation over very good regulation.”

In a move we can’t imagine will help the progress here, the American Bankers Association submitted a formal request for the OCC to pause new national bank charter grants to various crypto companies including Coinbase.

Brazilian lawmakers reintroduced legislation to initiate a national strategic bitcoin reserve. If passed, the law would allow the country to accumulate up to 1 million bitcoin over five years.

Noteworthy

BIP360, a bitcoin improvement proposal that could help pave the way for long-term quantum resistance, was officially merged into the BIPs repository, a step toward potential eventual activation.

Dr. Alex Wissner-Goss, a prominent physicist / computer scientist, futurist, and AI doomposter extraordinaire, referenced an OpenClaw agent autonomously using bitcoin’s lightning network as part of the latest entry in his widely read series on AI acceleration.

Lightning Labs launched a new L402 toolkit designed for AI agents to more easily integrate lightning payments.

Travel

• OPNext, New York, Apr 16

• Bitcoin 2026, Las Vegas, Apr 27-29

As a recent retiree in Nebraska once said – in circumstances not totally dissimilar from this week – price is what you pay; value is what you get. When price moves violently against you, when everyone is telling you you’re wrong, when legions of margin-called hedge funds are desperate to get out at any price, the only relevant question is how the price you’re being offered corresponds to your assessment of value. So, putting aside the Fibonacci levels, the Big If True rumors of insolvent exchanges, and the endless bearposting: what is the value of bitcoin?

What is the value of an open, global ledger with auditable rules that cannot be transgressed by any government or corporation in a world where both are becoming more invasive every day? What is the value of the provably scarce units of that ledger as worldwide sovereign debt burdens necessitate accelerating currency debasement – and as the most powerful man in the world takes control of the money printer to support his agenda? How much more valuable are those scarce ledger units if they can be sent across the world cheaply and instantly; if they can be safely stored without the overhead of armies and vaults; if they are trivially verifiable and easily accessible to anyone with an internet connection; if they can be spent and secured composably and programmably? In a world where the proliferation of AI is rapidly diluting the value of the purely digital and eroding trust in human communication, what is the value of the only system in the world that, through Proof of Work, unforgeably links bits to atoms? As geopolitical relationships fracture into multipolar siloes, what is the value of an apolitical, neutral system of consensus controlled by no one and explicitly built for adversarial exchange?

We’d wager that your timeline was flooded this week with Highly Credentialed Experts answering these questions by reiterating the point that they’ve been making since bitcoin was trading at $10: bitcoin’s value is near-zero because it’s not acting like a safe haven or a hedge to market uncertainty. We agree with them on the second part: bitcoin is not a hedge. It gets closer to becoming a hedge every day that it doesn’t die and knowledge of its unique properties continues to diffuse through society, but for now, no septuagenarian central banker or bulge bracket wealth manager is going to reflexively shift allocations toward bitcoin when things get spicy. If you’re still here after this week, you are making the bet that this will shift over time; you are making the bet that the market is, in the long run, a weighing machine that will drive a convergence of price toward bitcoin’s fundamental value. We could make a variety of arguments about what that value ultimately is, but we think any intellectually honest reader will conclude, after perusing the litany of rhetorical questions above, that the answer is both very far from zero and very far from today’s price.

Selected Portfolio News

Strike launched bitcoin-backed lending in Texas:

As well as Alabama:

And launched an early direct deposit feature:

Fold rolled out a totally revamped version of its mobile app:

Maple AI now supports Kimi K2.5, one of the most powerful open source reasoning models:

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.

Media

Ten31 Co-Founder Jonathan Kirkwood published a new piece on the competitive advantage of secure and private data in an era of proliferating artificial intelligence capabilities.

Ten31 Partner Matt Odell appeared on the Why Are We Bullish podcast to discuss this week’s wild bitcoin price action.

Fold shared its 2026 customer letter, and the company’s head of brand and design was interviewed by San Francisco’s Presidio Bitcoin.

Market Updates

Congress was able to forestall yet another protracted government shutdown with a narrowly passed spending bill that will fund most operations through September 30 (despite an ongoing dispute over DHS funding), potentially clearing a near-term overhang on markets.

As soon as the lights were turned back on, Senator Thom Tillis was quick to reiterate that he won’t vote to confirm recent Fed Chair nominee Kevin Warsh until the DOJ’s criminal investigation into Jerome Powell is resolved.

President Trump didn’t seem terribly worried about that, as he told a private dinner group that he might sue Warsh if the new Fed Chair doesn’t successfully get rates lower. He later clarified that the remark was a joke and all in good fun (the classic “haha, jk … unless”).

When pressed about this comment by tribal elders during Congressional testimony this week, Treasury Secretary Scott Bessent simply said any decision to sue the Fed Chair would be “up to the President.”

The latest US Manufacturing PMI reading came in much hotter than expected, perhaps the latest in a line of recent signals cautiously signaling cyclical reacceleration in the US real economy.

The world’s largest tech companies are certainly doing their part to try to ensure that narrative plays out, as the big four hyperscalers have now updated their 2026 capex estimates to more than $600 billion, up ~60%+ Y/Y.

Amazon, Google, and Microsoft all fell pretty substantially post-earnings, as many investors are clearly trying to digest the ultimate return on capital of this spending, but Nvidia CEO Jensen Huang gave the market some comfort on Friday by assuring everyone it’s all sustainable (we would never fade Jensen, but you could be forgiven for thinking he’s doing a little book-talking here).

That said, this – along with the administration’s push to aggressively re-shore critical industries and supply chains – is a factor that will bear close monitoring this year with the potential advent of Kevinomics at the Fed, which could create some conflicts between funding reindustrialization and absorbing Treasury issuance for the commercial banking system.

Despite the hotter PMIs and hyperscalers spending roughly one TARP per year on data center buildout, Fed Governor Christopher Waller released a statement this week indicating he dissented from the FOMC’s decision to hold benchmark rates flat at the last meeting due to growing concerns around the job market, which he calls “not remotely healthy.”

Again, the President seems fairly sanguine here, as he posted to close out the week that the Dow Jones index – which just hit a record 50,000 for the first time – will reach 100,000 by the end of his term thanks to his tariff policies (good for a ~26% IRR if Trump’s forecasting holds).

On the trade front, the White House announced a new $12 billion critical minerals stockpile and reiterated plans to institute price floors on key materials, in line with the administration’s clear shift into a wartime economy stance.

Meanwhile, the US and India announced a new trade deal that will lower tariffs immediately, and after cooler heads prevailed (for now) on Greenland, the EU said it will resume work on its comprehensive US trade framework.

In a relatively rare direct statement, Chinese President Xi Jinping openly called for the Yuan to become the world’s reserve currency. For a whole host of reasons, we’ll take the under here.

Despite no clearly identifiable negative catalyst other than follow through from the Warsh nod, bitcoin experienced its largest absolute dollar decline from an all-time high in history this week, including a 15% drop on Thursday that marked the worst single-day selloff since 2022.

The orange coin is now trading below the average ETF cost basis (though it’s worth noting this also happened in summer 2024) as IBIT volumes blew through their one-day record. In general, the ETF complex has seen continued outflows over the last couple weeks, but for what it’s worth, total bitcoin held in the vehicles is down only ~10% since the bearish impulse began on October 10th despite a ~40%+ decline in price over that time.

The bitcoin price is also now below Strategy’s average cost basis of ~$76,000 – though we note that that has also happened before, and doesn’t mechanically mean anything.

Interestingly, bitcoin has been trading right in line with the software complex over the past few quarters, and the correlation intensified this week as investors suddenly seemed to calculate the threat of AI to traditional SaaS moats and began puking IGV in earnest. We don’t dispute that bitcoin is indeed software, but we’d argue any investors selling both on the thesis of the bits-to-atoms rotation may want to pull up a long-term hashrate chart.

Over the course of the wild week, everyone’s crypto greed and fear gauges fell into historically low territory, with readings on Thursday printing lower levels than both the 2022 bottom and even the COVID flash crash.

Similarly, the Mayer Multiple – a popular cyclical metric which measures the ratio of the current bitcoin price to the 200-day moving average – reached levels consistent with prior bottoming zones.

At the depths of sentiment, JP Morgan’s quantitative strategist indicated that after the recent price action, bitcoin now looks “even more attractive compared to gold over the long term.”

Regulatory Update

As the long-awaited CLARITY Act for “crypto market structure” continues to stall, Treasury Secretary Scott Bessent said it’s imperative that Congress pass the legislation soon.

Virginia’s state legislature advanced its strategic bitcoin reserve bill.

Noteworthy

Per a new report in the Wall Street Journal this week, a high-ranking UAE official bought 49% of the Trump family’s digital assets entity World Liberty Financial. The President suggested he was unaware of any details of the deal.

The latest JP Morgan annual family office report shows that the vast majority of survey participants still have no bitcoin exposure, and nearly three-fourths still have no gold exposure.

After several years of explicitly pushing for scaling the Ethereum ecosystem through “Layer 2” solutions off the main blockchain, founder Vitalik Buterin critiqued the protocol’s current roadmap and argued scaling should return to the main chain.

Elsewhere, Kraken completed the first documented $1 million settlement on bitcoin’s lightning network, the latest data point showing the progressive maturation of bitcoin’s main second layer protocol.

Prominent crypto venture capital investor Kyle Samani called it quits on digital assets, noting (in a now-deleted post) that “all the interesting questions [in crypto] have been answered.”

Tether released MOS, an open source bitcoin mining operating system.

Travel

• Bitcoin Investor Week, Feb 9-13

• Bitcoin 2026, Apr 27-29

Oil was the industrial age’s stored sunlight as buried work, compressed by time and geology, waiting to be unleashed. Compute is the digital age’s stored competence as humanity’s accumulated experience, encoded in language and images, compressed onto silicon, and ready to be leveraged. Yet, an ocean of oil did not create wealth by simply existing. The economic surplus of oil emerged only when energy was refined, transported, priced, and sold to consumers in the form of goods and services. Production itself alone was never sufficient. Economic surplus was born only where producers answered the market’s “why” correctly. AI-assisted competence is forming a similar reserve today, not energy in barrels, but capability in tokens: a reservoir of “how” that can be summoned in seconds. Like energy, competence alone does not determine outcomes. Competence enables more execution, but it is human judgment at the edge that governs choice allowing for coherence to be established. Judgement is required for the answer to “why”. Why this product, why this market, why now rather than later. And when the cost of execution collapses, the penalty for choosing the wrong “why” rises. Therefore, internal judgement which ultimately leads to coherence must be protected.

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In competitive markets, surplus is created in the spread between what it costs producers to deliver value and what consumers are willing to pay for it. As competence equalizes, that spread compresses: when stored expertise floods the market, the marginal cost of being “good” collapses with it. Baseline competence becomes abundant and widely accessible. The distance between good and great does not just narrow, it becomes more contested. When everyone draws from the same pool of competence, outcomes converge, and convergent outcomes cannot generate economic surplus. Competition intensifies not because opportunity disappears, but because more actors arrive at the same conclusions, armed with the same tools, at the same speed.

This is where secure and private coherence emerges as a critical differentiator. Coherence, in its core sense, carries two intertwined meanings: the quality of being logical and consistent, and the quality of forming a unified whole. It is therefore not mere consistency, rigid uniformity that can homogenize, but the deeper internal refinement of models (mental, operational, and strategic) that aligns actions across time and through uncertainties into a resilient, proprietary system. Without secure and private coherence, reliance on commoditized AI models leads to homogenized strategies. If organizations fail to secure their refined internal decision models, which provide this greater coherence, then they become indistinguishable from public, shared models. Those models accessible to all erode margins through sheer competition. As with every industrial revolution in our history, everyone optimizing toward the same equilibria competes away the very surpluses they seek, turning abundance into a zero-sum race.

Thus, AI introduces a multiplier that cuts both ways. AI accelerates trajectories already chosen both positively and negatively. Focus compounds faster, but incoherence leaks value faster too. Judgment outsourced to AI-generated competence without internal curation produces homogenized decisions where margins collapse under competitive pressure. To counter this, protected internal refinement becomes essential. Iteratively honing proprietary human insights, filtering noise, and building coherent frameworks that diverge from the crowd needs to be secured. In an era where AI agents operate hierarchically, secure and private coherence demands sovereignty at the root: the base agent, capstone of the system, must remain under sovereign user control. This capstone agent orchestrates specialized project agents, each being able to command legions of worker agents that execute across digital realms and embodied physical domains all refining, delegating, and acting on the user’s proprietary vision. Without control over this foundational layer, the entire hierarchy risks compromise: deletion by platform whims, man in the middle attacks, theft by competitors, or seizure by governments, all of which would expose or dilute the human refined internal models that sustain differentiated coherence. Sovereignty here is not optional luxury but structural necessity. If the root is not owned and shielded, the cascading coherence built atop it becomes vulnerable to external capture, homogenization, and eventual margin erosion, rendering the user’s strategic refinements no different from commoditized public outputs.

StartOS from Start9 delivers sovereignty at the root: it enables users to run and own their capstone agent on personal servers shielding from deletion, theft by competitors, or government seizure, while preserving full command over the cascading hierarchy of project and worker agents. Yet the high-scale inference that amplifies this original coherence will most likely still run on specialized, remote silicon farms, where hardware segmentation and economies of scale dictate location. Protecting prompts, contexts, and proprietary data during that inference is therefore non-negotiable. OpenSecret, the confidential computing platform behind TryMaple.AI, enforces this protection through secure enclaves. These isolated environments keep data encrypted in transit, at rest, and during GPU processing. Decrypted and executed only inside the enclave, invisible to cloud providers, hosts, or operators. The result is verifiable private leverage of full-scale models, device-synced via end-to-end encryption, backed by open-source code and attestation. By combining sovereign base-agent control with enclave-secured remote inference, organizations defend secure and private coherence against commoditization. Refined internal models stay meaningfully differentiated rather than indistinguishable from public alternatives. This is how margins are not merely defended but actively produced. The economic surplus isn’t acquired through hoarding competence, but by cultivating secure and private coherence that public models cannot access or replicate.

The contrarian refusal to follow the crowd becomes a strategic necessity. Ten31 exists to underwrite judgment in an era that is systematically trying to eliminate it. We are optimizing to operate in a landscape flooded with output, where output itself is not scarce. We invest and help to mold the systems that preserve the integrity of economic decisions, align producers with consumers, settle value without permission, and refuse to dilute consequences. Credible Finance is not about efficiency for its own sake, but about ensuring correct judgments are able to compound. We bridge individual judgment with systems designed to protect internal coherence that can thrive amid accelerating external competition.

The flood of competence commoditizes output, and only sovereign and secure judgment will survive this race to the bottom. Advancement requires coherence forged privately (StartOS), iterated under user control, and shielded from capture (OpenSecret). Ten31 capitalizes this architecture because we invest in what endures through abundance: systems that let the correct “why” compound without dilution or permission. We look to identify and amplify the economic surplus that emerges when sovereign judgment meets uncompromised consequences. In acceleration, surplus accrues not to those who produce the most, but to those whose coherent judgment cannot be copied.

After months of a Will They / Won’t They soap opera breathlessly covered by the financial press, President Trump finally announced Kevin Warsh as his pick to replace long-suffering Fed Chairman Jerome Powell. Warsh has spent the last year in a hot / cold relationship with prediction markets as the presumptive nominee, but his selection for the seat sent the dollar higher, bitcoin lower, and an extremely overheated precious metals complex spiraling into a shocking drawdown on Friday, with gold down over 10% and silver down as much as 32% intraday. Consensus seemed to view the pick as relatively hawkish given Warsh’s years of consternation about inflation even during the depths of the Great Financial Crisis, as well as his recent commentary about hoping to match a more accommodative Fed Funds stance with a more restrictive posture on the Fed balance sheet, which Warsh ostensibly thinks should shrink. Whether that hawkish read on the new appointee’s framework is correct (we suspect that it may be more bark than bite given his close family ties to the President and the administration’s clear need for no obstructions to its high growth agenda) and whether or not Warsh actually gets confirmed (we suspect this may be harder than Trump hopes given the recent DOJ probe into Chair Powell), we are highly skeptical that such a strategy is actually workable by Mr. Warsh or anyone else.

It’s a reasonable soundbite to argue for lower rates and a lower Fed balance sheet, and we sympathize with the desire to “let Main Street have its turn.” However, the fiscal reality the US has created over the past 50 years makes that extremely difficult: with nondiscretionary federal spending already right around 100% of annual tax receipts, the game doesn’t work if someone is not ready to be a price-inelastic buyer of marginal new Treasury issuance. Even if the new Fed Chair can successfully dictate the Fed Funds Rate materially lower, longer duration rates may or may not follow if left unchecked, and given all the forces at play – a “run it hot” agenda which, even if successful, should tend to bias long-end rates higher, with or without a meaningful inflationary impulse; a massive boost to major government line items like defense spending; and an administration whose trade policies are extremely likely to drive foreign capital repatriation on the margin – it’s not clear why there should be material downward bias on longer maturities. At current yields, the blended effective interest rate on outstanding US debt is already trending higher over the next few years as pre-2022 ZIRP issuance continues to mature, so if the long end just doesn’t respond to the path of Fed Funds (or worse, drifts higher per the factors just discussed) the US will quickly move into scenarios like the charts above where nondiscretionary spending blows out relative to tax receipts – and that’s before even considering the possibility that Clawdbot takes everyone’s job and kicks unemployment benefits and stimmy checks into high gear. Without an accommodative balance sheet somewhere in the system to exert downward pressure on realized federal interest expense, it strikes us as highly questionable that this plane will land as intended.

Of course, we suspect that the Warsh camp – including Scott Bessent, his fellow Druckenmiller protégé – all generally know this and that Warsh would not have ultimately gotten the nod if he were not prepared to play ball to keep the wheels from falling off. Furthermore, it’s possible that the commercial banking system may be able to step into what has been the Fed’s role over the past several decades and become the Treasury buyer of first and last resort, a path that regulators have clearly been trying to shore up with much less restrictive bank balance sheet rules. But whatever the ultimate source of absorption, the math dictates pretty simply that – absent an AI productivity boom that proceeds at precisely the right pace – the monetary base will need to expand to maintain the stability of the Treasury market, government finances, and ultimately US hegemony. While the mainstream press runs with the popular balance sheet hawk narrative, we encourage readers to keep their eyes on the system’s hard constraints and to not be surprised when the appetite for balance sheet rectitude winds up in the same heap as DOGE.

Selected Portfolio News

Strike reduced minimums for bitcoin-backed loan users in Iowa:

Start9 began rolling out the latest models of its Server One product:

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.

Media

Giga Energy published a new piece digging into bitcoin mining’s relationship to utility demand response programs.

Market Updates

Following months of Polymarket liquidations and Truth Social browbeating, President Trump finally announced Kevin Warsh as his pick to replace Fed Chairman Jerome “Too Late” Powell.

The market reaction may not have been what the President was looking for, as stocks slid, bitcoin fell, and precious metals got annihilated – with gold and silver both putting up one of their worst days in history – on the consensus view that Warsh is a more hawkish choice than other frontrunners like Rick Rieder and Kevin Hassett.

Indeed, Warsh had a long track record of concern about inflation during the nadir of the Great Financial Crisis – even as unemployment pushed double digits – and he has more recently advocated for reducing the size of the Fed balance sheet alongside a lower Fed Funds Rate.

Notably, though, the new Fed Chair appointee has longstanding ties to the Trump family, which may or may not come into play as the White House increasingly looks to take a stronger hand in Fed policy.

Perhaps even more noteworthy was an interview with Stanley Druckenmiller just after the announcement, where the famed hedge fund manager suggested that Warsh – who has worked closely with Druckenmiller in recent years – “is not a permanent policy hawk” and is “very open minded” to the approach of Plunge Protection Team leader Alan Greenspan.

Finally, Druckenmiller noted he’s excited to see Warsh partner with Treasury Secretary Scott Bessent (another of his close associates) to build a new “accord between the Fed and the Treasury.” We feel like we’ve heard that somewhere before.

For his part, Bessent commented just before the announcement that he encourages the next Fed Chair to be open minded about accommodative policy given “what’s coming over the next few months,” which Bessent elsewhere said he believes will be a “non-inflationary boom.”

Based on all the fiscal realities at play – including a tax season set to increase refunds by more than $100 billion Y/Y – we expect this kind of open-mindedness will likely be very necessary soon, particularly if President Trump wants to “drive up home prices” to keep current homeowners wealthy, as he suggested in a press conference this week (we will leave readers to do their own calculations on how this helps to address the “national housing emergency”).

As another sign of the changing temperature at the Eccles Building, recent Fed appointee Stephen Miran – whose term technically expires this week but who can stay on until a replacement is approved – chimed in to reiterate that he believes unemployment is still “about half a point too high.”

That said, the latest PPI reading for January came in well above consensus at 3% and may complicate the narrative around aggressive easing, at least until the administration just chooses to bite the bullet on prices.

All the consternation and speculation may still be premature, though, as GOP Senator Thom Tillis quickly reiterated that he will not confirm Warsh or any other nominee until the recent DOJ probe into Jerome Powell is settled.

For what it’s worth – which may not be much – Warsh has previously said that bitcoin is the “new gold” for people under 40 and praised elements of bitcoin’s design.

You could be forgiven for forgetting that there was other news out of the Fed this week, but the latest FOMC meeting on Wednesday saw the central bank hold rates steady as expected, though the more noteworthy update was the committee removing language about a weakening labor market from its statement.

The President responded predictably on Truth Social, but his latest tirade threw out an interesting nugget about Powell endangering “national security” by not lowering rates. As far as we can tell, this was the first time Trump has directly suggested this, and we think it may be an interesting signpost for how the new Fed-Treasury nexus will operate.

While the White House continues to work on remaking the Fed, Congress has once again found itself in shutdown mode as Democrats looked to block DHS funding in the latest appropriations package amid high tensions over the President’s immigration policy.

The government officially entered a partial shutdown on Saturday morning, though as of this writing there appears to be decent momentum toward a near-term resolution.

Elsewhere in monetary plumbing, news emerged over last weekend that the New York Fed had conducted a rate check on the USDJPY cross as the Yen weakened aggressively this month, often seen as a precursor to intervention and likely the driver for the major gap-up in the Yen last Friday. However, Secretary Bessent dismissed the rumors, noting that the US is “absolutely not intervening” in the Yen market.

Lost in the shuffle of the week were a couple other overseas headlines. First off, the Trump administration signed an executive order declaring a “national emergency” over actions taken by the Cuban government, presumably a precursor to the next regime change efforts in the US’s backyard. Similarly, a local court voided a Chinese company’s contract to operate ports in the Panama Canal, potentially paving the way for more US influence in the region.

Amid the wild week, precious metals continued their unprecedented rollercoaster, with gold and silver both ripping up to historic new highs while also getting hit with massive downside volatility. Multiple times this week, the two metals lost bitcoin’s entire market cap over just a few hours, with silver dropping over 30% on Friday.

Asset management giant BlackRock filed an S1 for a new income-oriented bitcoin ETF targeting payouts based on a covered call strategy. Elsewhere in traditional finance, Morgan Stanley officially created a new role dedicated to digital asset strategy.

Bitcoin’s network hashrate – which has climbed parabolically over the last two years almost regardless of price action – fell off sharply this week, likely the result of massive winter storms that blew through the US, triggering demand response shutdowns in many grid systems. We note for any concerned readers that this is exactly the kind of use case that makes bitcoin so unique and powerful as a highly flexible, energy-linked network.

Regulatory Update

Blockchain analysts alleged that a family member of the company hired by the US Marshals to secure the agency’s seized bitcoin holdings stole $40 million from the account this week.

The leaders of the SEC and CFTC joined the Wall Street Journal for a joint interview where they indicated plans to craft their own rules and guidelines for splitting authority in the absence of a more formal partition from the long-awaited and again-delayed “market structure bill.”

Noteworthy

A large and growing group of autonomous Clawdbot instances initiated their own bots-only social forum this week, and shortly thereafter began discussing how to leverage bitcoin and Nostr, an interesting validation of our long-held thesis about how AI agents would likely interact with each other over time.

OpenSats published its annual report highlighting over $30 million of cumulative contributions to open source developers around the world.

Prominent international crypto exchange Binance announced it will convert its $1 billion emergency fund into bitcoin.

Travel

• Bitcoin Investor Week, Feb 9-13

• Bitcoin 2026, Apr 27-29

Anyone hanging on to their Rules-Based Global Order^TM stock in hopes of a dead cat bounce took another big drawdown this week, as President Trump disturbed the peace at the annual Convocation of the Anti-Civilization Cabal World Economic Forum in Davos with escalated threats to annex Greenland. The President called for new punitive tariffs on the EU until the member countries carve a path for the US to effect a “total and complete purchase” of Greenland, sending many markets – except, of course, precious metals – into a deep selloff. Trump made some reassuring comments about the use of military force later in the week that let investors breathe a sigh of relief, but not before making a string of remarks pointing to an outright repudiation of the Atlanticist paradigm that has (sometimes explicitly, always implicitly) defined international relations over the past half-century. World-renowned Long-Term Debt Cycle Observer Ray Dalio told the WEF crowd that this old paradigm is already extinct and encouraged attendees to stop being naïve about its return; while Mr. Dalio may be somewhat vulnerable to accusations that he called 10 of the last 2 bond market crises, we would have to agree with him here. It still seems far from consensus, but the international Era of Good Feelings is clearly giving way to, as one of the most powerful advisers in the administration puts it, an era of Great Power Conflict. This fracturing seems to be coinciding with and reinforcing a broad push to ramp up worldwide fiscal spending for militarization and reindustrialization even as public debt burdens sit near all-time highs – exemplified this week by the new Japanese Prime Minister’s vow to end “excessive austerity” with debt to GDP already above 250% – which only strengthens our conviction that hard assets will be increasingly essential for all investors this decade. And within that paradigm, recent boring price action notwithstanding, we continue to see substantial unrecognized value in a globally portable, instantly transmissible, easily verifiable, permissionless, energy-linked, and absolutely finite money for enemies.

Selected Portfolio News

Fold announced a partnership with Steak ’n Shake to facilitate the company’s new bitcoin bonus plan:

Strike added consumer lending in Vermont:

Unchained launched an improved mobile transaction flow to make its multi-sig transactions smoother:

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.

Media

Ten31 Managing Partner Marty Bent appeared on the Bitcoin for Millennials podcast to discuss the precious metals rally, bitcoin’s evolving role in traditional finance, and more.

Market Updates

To make sure everyone had a nice, quiet long weekend, President Trump dropped his latest Truth Social nuke on Saturday, threatening new tariffs on the EU until the organization helps the US facilitate a “total and complete purchase” of Greenland.

Treasury Secretary Scott Bessent told reporters the US needs the territory to shore up its national security, and that the President’s actions show the world that the US is So Back.

The administration was broadly aggressive in its implications for what acquiring Greenland might involve, with Trump ominously telling the press “you’ll find out” how far he’s willing to go.

The EU immediately responded by scrapping the extremely lopsided trade deal it reached with the US in July while threatening to unload a “trade bazooka” in retaliation (though the New York Times quickly reported that key leaders were privately leaning toward negotiating).

The Chief Investment Officer of large European insurer Allianz said the European bloc should pressure Trump with market volatility (effectively betting once again on the “TACO” trade), and a Danish pension fund took him up on it, announcing it will exit its $100 million US Treasury position by year-end.

In a sign of how strong the trans-Atlantic relationship is, Secretary Bessent noted that this Treasury sale is “like Denmark itself, irrelevant.”

All the annexation kerfuffle spooked markets early in the week, with US stocks putting up their worst selloff since October as the 10-year Treasury yield spiked back up to levels last touched in the summer. The President said no one should be concerned here, as stocks “will double in a short period of time” (to be fair, we have to admit that his last call like this was pretty solid).

Like Lucy holding the football for Charlie Brown, President Trump once again pulled a gotcha on shorts later in the week, reassuring everyone that he won’t look to take Greenland with military force and that he has reached “the framework of a deal” with NATO on his demands for the island.

That said, the next Donroe candidate to watch may be Cuba, as reports this week suggested the administration is actively seeking regime change there by year-end. In a perhaps related update, Treasury Secretary Bessent indicated that the US could gain critical mineral independence within two years by leveraging the US’s broader sphere of influence.

While the administration continues to look for new real estate to add to the US portfolio, the President’s sweeping tariffs remain in a state of limbo, as the Supreme Court once again did not issue a ruling on their legality (though some have argued the longer we go without a ruling, the more likely it is to fall in the administration’s favor). The next potential update here will be on February 20th.

Nevertheless, the President reiterated his plan to distribute $2,000 “tariff dividends” to most Americans, indicating he doesn’t believe he’ll need Congressional approval. Though as it relates to the more general affordability push, he also said he doesn’t like the idea of allowing people to dip into retirement accounts to fund down payments on homes, perhaps hinting that he wants to avoid the potential downside pressure that might create for equities.

Though we didn’t get an update from the high court on tariffs this week, SCOTUS did begin hearing arguments on the Lisa Cook case. During the proceedings, Justice Kavanagh suggested that the President firing the Fed Governor would “shatter Fed independence,” potentially previewing a decision that won’t favor the administration.

Meanwhile, BlackRock Fixed Income CIO Rick Rieder shot to the top of the Fed Chair leaderboards, as President Trump called him “very impressive” while suggesting that his shortlist for the job is “down to maybe one.” As of this morning, Polymarket pegs Rieder’s chances at 60%.

It’s worth noting that the BlackRock executive has previously called for a Fed Funds Rate of 3% “without question” and potential for further cuts from there. He has also argued that bitcoin belongs in an ideal portfolio (though thinks 5% exposure is too high).

The latest PCE readout – ostensibly the Fed’s most closely watched inflation metric – printed in line with consensus this week at 2.8%, still above target but potentially in a range that could grease the skids for someone like Rieder to continue advocating for lower rates.

Perhaps the most volatile market worldwide was in Japanese government bonds, which ripped up 25bps in a single day to kick off the week, as long end yields look like they have no ceiling in sight.

The Greenland controversy no doubt added fuel to the fire, but much of this move was seemingly precipitated by new Prime Minister Sanae Takaichi vowing to end the “excessive austerity” in Japanese government spending. We are admittedly curious if this austerity is in the room with us right now, but either way, these concerns pushed JGB illiquidity to all-time highs this week.

The Bank of Japan held its benchmark interest rate steady as expected, though Governor Ueda acknowledged, with characteristic understatement, that “long-term interest rates are rising at quite a fast pace” while noting the bank “is ready to take nimble action to cope with exceptional moves.”

Shortly thereafter, the Yen gapped up hard on Friday after weeks of softness, presumably a sign of the government’s latest intervention to temporarily stabilize the currency.

Amid all the uncertainty and massive moves, silver continued its historically blistering run, breaking $100 per ounce for the first time in history while gold pushed right up against the $5,000 level for the first time.

While bitcoin continued to get no sustained debasement trade love this week, Delaware Life Insurance Company launched the market’s first fixed index annuity with bitcoin exposure via IBIT.

Regulatory Update

As part of his remarks in Davos, President Trump reiterated his support for “crypto”-friendly policies as a means to counter China, and suggested he expects to sign the long-awaited market structure bill very soon.

Congressional staffers, however, say the bill will likely be delayed for several more weeks due to ongoing disputes between Coinbase and the banking industry around stablecoin rules.

Patrick Witt, director of the White House’s Crypto Council, said this week that the US is continuing to work on mechanisms to add to the strategic bitcoin reserve, noting the administration is trying to get around “obscure legal frameworks” that have impeded the process.

Following a few similar state announcements over the past several weeks, Tennessee, Oklahoma, and Kansas all introduced their own state bitcoin reserve bills.

Noteworthy

Rabobank macro strategist Michael Every published an interesting and non-consensus piece on what he sees as President Trump’s “Reverse Perestroika” agenda to remake the US economy.

Like all good sellside analysts who make sure to wait until after a massive performance gap to recommend portfolio shifts, a Jefferies strategist published a note downgrading bitcoin and upgrading gold, encouraging clients to rotate out of the orange coin and into the yellow metal.

Meanwhile, scientists accidentally did alchemy and made gold from lead in the Large Hadron Collider this week.

Farcaster, an ostensibly decentralized, crypto-powered alternative to Twitter which raised $150 million from blue chip crypto funds less than two years ago, announced it would return investor capital while selling off assets.

Travel

• Bitcoin Investor Week, Feb 9-13

• Bitcoin 2026, Apr 27-29

The showdown we all knew was coming finally reached a boiling point this week via news on Sunday night that the Department of Justice is threatening a criminal indictment against Federal Reserve Chairman Jerome Powell (who is set to step down as Fed Chairman in May) over his testimony about the central bank’s spending on controversial building renovations. Powell – looking highly beleaguered, potentially due to the loss of the new building’s planned rooftop beehives – released his version of a hostage video over the weekend wherein he argued the threat was simply the White House’s retaliation for the central bank’s refusal to accommodate President Trump’s interest rate demands. In the video, the Chairman suggested this constitutes an attack on the hallowed principle of Fed Independence, and that he will continue to defend the central bank’s autonomy in setting monetary policy going forward. We understand Powell’s frustration (and think he’s almost certainly right in his assessment of the administration’s intentions), but his video may have left some viewers wondering where this “independent” Fed has been lo these many decades? Where was it when the smartest guys in the room blew up their balance sheets because housing prices didn’t go up forever? Where was it in spring 2020 when it used its “infinite cash” to accommodate an unprecedented shutdown of the economy (then added trillions in additional liquidity just for good measure for two full years thereafter)? When it chose to cut rates by 50bps for no clear reason the month before a general election? Or how about every time it stepped in to quiet down a squirrely MOVE Index over the past 20 years?

Strike Founder Jack Mallers said it better than we can, but the reality is that the Fed has never been functionally independent in the modern era, and the organization’s choices (across many Presidential administrations and Fed Chairs) have consistently made that reality very plain. But let’s just take the argument at face value and say that until this unique and unprecedented encroachment by a blowhard wannabe Caesar, the Fed has indeed operated independently – is that actually any more flattering? Under the rein of this supposedly independent Fed, housing prices have dramatically outpaced wage gains, disproportionately hurting the middle class and the country’s younger generations. Based on official statistics, this Independent Fed has presided over the dollar losing ~28% and ~85% of its purchasing power over the last 10 and 50 years, respectively (and when compared to more objective markers like the price of gold and scarce assets, the record is even worse). During this Independent Fed era, the percentage of Americans living paycheck to paycheck has ballooned to as high as 78%, and so-called deaths of despair statistics look like charts from the late-era Soviet Union. We won’t comment on the wisdom (or lack thereof) of the President’s tactics, but if this is really what “Fed Independence” looks like, perhaps it’s time to consider an alternative path – preferably one where monetary policy is not set at the whim of a few central planners (in either the Eccles Building or the White House).

Selected Portfolio News

Strike rolled out its bitcoin-backed lending product to a variety of new states this week. The product is now live for both consumers and businesses in the vast majority of US states:

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.

Media

Ten31 Managing Partner Marty Bent joined The Last Trade podcast to discuss the outlook for 2026, the growing power of AI, and much more.

Mempool.space Founder and CEO Wiz was featured in an article on the growth of the bitcoin ecosystem in El Salvador.

Market Updates

In a dramatic escalation of the ongoing war to determine who controls US monetary policy, Fed Chairman Jerome Powell announced late Sunday night that the Justice Department has threatened him with a criminal indictment for perjury regarding his Congressional testimony on the Fed’s headquarters renovations last year.

Essentially every former Fed Chairman and Fed-linked official (other than, curiously, Larry Summers – we can’t imagine why) circled the wagons around Powell shortly thereafter, coming together to release a statement condemning the DOJ’s actions.

The heads of the ECB, Bank of England, and virtually every other European national bank published their own statement in support of Powell. For our part, we can only imagine that the Founding Fathers must be rolling in their graves over this encroachment on the autonomous power of a small body of unelected lawyers and bankers, particularly one with such strong support from the Europeans.

Beyond the somewhat predictable outcry from the DC–Frankfurt axis, the move – which we can probably all fairly assume is politically motivated – could easily backfire, as Republican Senator Thom Thillis announced he will block any Trump nominee to fill Powell’s seat (which is set to be vacant in May) until this matter is resolved. This threat could have some teeth, as a defection from even one Republican Senate Banking Committee member could lead to a stalemate on confirming nominees, complicating President Trump’s clear desire to bring the Fed to heel.

Either way, the President still doesn’t seem to have made up his mind on which courtier will receive that nomination, as he mentioned this week that he might want to keep Kevin Hassett – previously the frontrunner for the nod – in his current White House seat. Those comments immediately made Kevin Warsh the overwhelming favorite to win the nomination.

Beyond the ongoing monetary Game of Thrones, macro data this week generally looked pretty favorable, with headline December CPI meeting expectations and Core CPI coming in slightly below.

Meanwhile, existing home sales spiked in December for the metric’s biggest gain in two years on lower mortgage rates, and both the Empire State Manufacturing and Philadelphia Fed Manufacturing Indices were much stronger than expected for the month.

BlackRock’s Larry Fink noted he now expects the US will grow “above trend” for the next few years, a pretty stark reversal from consensus expectations on Wall Street less than a year ago.

It’s been a relatively quiet period for explicit updates on the trade war, though this week saw both a new $250 billion deal between the US and Taiwan, as well as an apparent attempt by Canadian PM Mark Carney – the central banker par excellence – to cozy up to China and show the US he’s super duper serious.

We’ll be watching closely for more updates on this front soon, as the Supreme Court’s ruling on the legality of Trump’s tariffs should drop any day and could come as soon as January 20th.

Despite – or perhaps because of – uncertainty caused by all the threats to Fed Independence, bitcoin broke $97,000 for the first time since November, while precious metals also extended their recent banner runs.

Dartmouth University’s endowment reported a new $10 million IBIT position in their latest 13F filing this week, joining Harvard in the Ivy League Bitcoin Club. Interestingly, the filing comes on the heels of a December Institutional Investor article citing Dartmouth as an example of an endowment that passed on bitcoin several years ago.

Regulatory Update

The “crypto” industry’s long-awaited “market structure” bill stalled in Congress once again this week. While the latest draft generally included positive updates such as explicit protections for non-custodial software developers and favorable self-custody language, Coinbase CEO Brian Armstrong said the company would not support it as current language would overly advantage banks relative to stablecoin issuers.

Meanwhile, Senators Cynthia Lummis and Ron Wyden proposed a new standalone bill specifically geared toward protections for software developers, though it’s unclear if anything like this can be passed while the market structure bill is still outstanding.

West Virginia’s legislature introduced a new bitcoin reserve bill that would allow the state to invest up to 10% of public funds into bitcoin and gold.

The Bitcoin Policy Institute submitted a letter to Congress advocating for any de minimis tax exemption for “crypto” payments to include bitcoin.

Noteworthy

Pro-bitcoin Venezuelan opposition leader Maria Corina Machado met with President Trump at the White House this week, presenting him with her Nobel Peace Prize medal.

Bitchat – the open source, offline messaging tool launched by Jack Dorsey – has become Uganda’s most-downloaded app as the country’s government curbs internet access in an attempt to control opposition.

Amid skyrocketing silver prices, the US Mint announced temporary suspension of new silver coinage pending price stabilization.

Travel

• Nashville Energy & Mining Summit, Jan 2026

• Bitcoin Investor Week, Feb 2026