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

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

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

Selected Portfolio News

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

Media

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

Noteworthy

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

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

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

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

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

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

Selected Portfolio News

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

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

Media

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

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

Noteworthy

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

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

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

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

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

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

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

Selected Portfolio News

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

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

Media

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

Noteworthy

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

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

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

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

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

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

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

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

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

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

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

Media

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

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

Noteworthy

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

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

Selected Portfolio News

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

Noteworthy

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

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

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

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

Selected Portfolio News

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

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

Fold announced a partnership with Lead Bank:

Media

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

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

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

Noteworthy

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

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

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

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

Media

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

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

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

Noteworthy

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

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

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

Selected Portfolio News

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

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

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

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

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

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

Selected Portfolio News

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

Fold launched the first bitcoin gift card for TikTok users:

Media

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

Noteworthy

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

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

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

Selected Portfolio News

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

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

Media

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

*Evergreen tweet for everything about this headline.

Regulatory Update

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

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

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

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

Noteworthy

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

Polymarket added instant bitcoin deposit functionality over the lightning network.

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

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

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

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

Selected Portfolio News

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

While officially launching in Spain and Italy:

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

Coinkite announced major new firmware updates for its flagship products:

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

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

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

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

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

Selected Portfolio News

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

Noteworthy

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

An economy exists to satisfy human wants across time, with capital enabling individual economic participation through choice. How an individual chooses to use capital is the physical expression of their time preference. Whether capital is held, deployed, pledged, or spent, every action is a judgment on what the future is personally worth relative to the present. Our fiat system structurally distorted this calculation. An expanding money supply imposes a persistent erosion on patience. Capital is driven to move out of a necessity to outpace decay, rather than being drawn towards opportunity. Movement is not a choice, but a coerced Red Queen’s race. Consequently, fiat replaces a patient option with a binary decision: you either run to stay in place, or get left behind. Bitcoin, by contrast, restores a spectrum of opportunities across a risk curve, allowing and rewarding patience to active stewardship.

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Bitcoin’s fixed denominator decompresses the pressure of dilution. It allows capital to be allocated according to market judgment rather than the need to offset monetary expansion. Consequently, bitcoin cannot be reduced to a single “use case”. To do so would be to ignore the agency of the individual. Bitcoin is not inherently a store of value or a medium of exchange, but a digitized capital environment that moves across a user’s spectrum of time preference. The asset makes no structural demands from the user as the user of bitcoin only asks for a unit of fixed supply. The same unit can sit dormant in a personal reserve, fund productive capacity through credit, or be spent for immediate utility. The asset’s characteristics remain constant. Only the holder’s intent changes expressed by their choice, not coercion. By simply reflecting the economic goals of the user, bitcoin restores the spectrum of capital allocation that fiat compresses.

When allocation is driven by intent rather than the fear of eroding purchasing power, capital functions as it was meant to: the lifeblood of the economy. Blood must circulate, for no living system survives stasis, but circulation is not the purpose. Life is. Blood moves to nourish tissue and sustain higher functions and capital is no different. At its best, capital flows toward productive enterprise, financing the infrastructure that expands what the economy can satisfy tomorrow. At its worst, it merely recirculates through financial claims and extended leverage, mistaking motion for health. An economy is not strengthened by the velocity of capital, but by whether that movement nourishes the productive body beneath it.

Credit extends purchasing power across time, allowing future production to finance present growth. However, credit loses its integrity when it is insulated from consequence through monetary dilution, perpetual refinancing, or fiscal policy backstops. In such an environment, capital is used to preserve the body of what once was, rather than building the body of what could be. Bitcoin restores economic consequence. Governed by the fixed denominator and final settlement, borrowing must once again justify itself against the future it claims to finance. Credit becomes sound only when it is tethered to productive judgment.

The utility of choice on how to use bitcoin is not exhausted by the binary decision whether to hold or spend. The choice on how you can best use bitcoin can broaden within new credit structures as dynamic collateral. By infusing bitcoin into the credit stack (equity, mezzanine and senior tranches) users capitalize a structure capable of supporting new enterprises without being surrendered. Rather than being consumed, bitcoin is enlisted in the service of growth and leveraged by assuming the risk of forfeiting its future appreciation.

In this framework, volatility is not a bug to be suppressed, but a mechanism of discovery. Volatility reveals whether a lending structure deserves to endure. On the downside, falling bitcoin collateral values force earlier recognition of risk and a tightening of underwriting. Weakness is confronted rather than deferred. On the upside, appreciating collateral improves coverage, accelerates deleveraging, and can reduce lender exposure. In the right structure, bitcoin’s volatility disciplines both sides of the loan. Thus, the ultimate test of credit is whether it builds more than it protects. When borrowing finances new capacity, it enlarges the future. When credit is used to preserve inherited claims or maintain the appearance of health, capital circulates in defense of the past. This is where systems lose vitality. Bitcoin matters because it reintroduces consequence, pressing credit back toward productive ends and away from reflexive preservation.

The Red Queen’s fiat economy asks how quickly capital can be pushed into motion before it loses value standing still. A bitcoin economy asks a harder, more vital question: What is worth preserving, what is worth risking, and what future is worth building? This is the deeper significance of the fixed denominator. It does not simply improve savings, but restores the conditions for judgment. Capital can once again move according to purpose rather than decay. The result is not less finance, but finance returned to its proper task: bringing into being more of what should exist.

Ladies and gentlemen, we made it. After months of false starts, frameworks of deals, messy breakups, and asymptotic progress, the US and Iran finally reached a deal to end (?) hostilities in the Persian Gulf and reopen shipping lanes through the closely watched Strait of Hormuz. Assuming this peace deal armistice extended pause whole thing holds for any meaningful amount of time, it will bring with it a series of major narrative violations that analysts and investors would do well to reckon with: oil didn’t go to $250, the 10-year didn’t go to 7%, the world didn’t reflexively de-dollarize, and the US didn’t (so far) get pulled into another neverending Middle Eastern quagmire (despite the exhortations of some Fox News regulars). That doesn’t justify the whole (mis)adventure, nor does it guarantee long-run success, but it should be a sign that the US still has a few rabbits to pull from its fraying hat, many of which will no doubt involve socializing any required pain from the workout of a long-term debt cycle onto the broader world (see Secretary of War Pete Hegseth’s “NATO 3.0” speech this week and ongoing “export restrictions” on frontier AI models for more).

While the market seemed to fret that newly-minted Fed Chair Kevin Warsh will throw a wrench into this whole gambit with his ostensibly hawkish desire to be “tough on inflation,” we continue to fade the narrative that Warsh will be, on net balance, meaningfully restrictive in the face of: more room to maneuver if the Iran deal holds; an already-struggling private credit backdrop; an increasingly K-shaped economy where the rates-sensitive lower half of the K is barely hanging on; a strategically critical AI buildout that can no longer rely solely on hyperscaler free cash flow; and federal nondiscretionary spending already roughly matching tax receipts. We can’t say for certain what moves the new Fed Chair might make – which appears to be exactly the way Warsh wants it given his rejection of the Bernanke-era “forward guidance” framework – but given all the outstanding constraints and Warsh’s long-running relationship with Treasury Secretary Scott Bessent (who has repeatedly called for greater coordination between the two institutions), we’d aggressively shade away from the narrative of Volcker 2.0.

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

Selected Portfolio News

Giga Energy Co-Founders Matt Lohstroh and Brent Whitehead were named among E&Y’s Entrepreneurs of the Year:

Media

Various Ten31 portfolio companies were highlighted in Michael Saylor’s keynote speech at the Bitcoin Prague conference.

Market Updates

President Trump kicked off the week by announcing that the US and Iran had finally reached a deal (seriously guys, a real one, we mean it this time, no take-backs) to end the ongoing conflict that has roiled the Middle East for much of this year.

In what may be a first for any event scheduled by a government, the two sides managed to sign the “Memorandum of Understanding” ahead of schedule, putting pen to paper on Wednesday evening rather than the originally planned Friday signing date.

The 14-point “milestone-based” memo seems to have something for everyone, with neocons, pacifists, MAGA bros, and IRGC hardliners all loudly trumpeting their preferred narrative on how amazing or unconscionable the deal is for one side or another.

Most importantly for markets, though, the agreement provided for an end to the US’s blockade of Iranian ports and a normalization of shipping in the Strait of Hormuz, which quickly led to three Saudi tankers carrying 6 million barrels of oil to exit the waterway, followed by a steady uptick of traffic through the week.

In response, crude oil prices fell below $80 per barrel for the first time since the war broke out. And don’t look now, but the DXY Index – which measures dollar strength against a basket of global currencies – hit new YTD highs this week, despite months of rabid de-dollarizer fanfiction likely flooding your timeline since the onset of hostilities.

But just like your favorite comic book villain, the conflict may simply be dormant until the next episode rather than fully dead and buried, as the agreement includes a 60-day window for “final negotiations” that could end with both sides right back in the same spot if key points like Iran’s nuclear program remain unsolved. Moreover, many sharp analysts of the situation have suggested that even if the MOU holds up for now, this bears the hallmarks of a tactical pause to make way for midterms before firing up the full regime change sequel sometime in 2027.

That said, the strategic picture – particularly Iran’s leverage over the narrow waterway we’ve all unwillingly come to know too well – may look very different a year from now, depending on the pace at which various GCC countries can complete pipelines and other megaprojects to avoid the Strait altogether.

In any case, the potential tailwinds for sovereign bond yields that might have been stimulated by easing oil prices were largely offset by the first FOMC meeting under new Fed Chairman Kevin Warsh, where the central bank held rates steady but 9 of 19 officials indicated that a rate hike would be the likely next move from here (up from 0 pointing that way in March).

For reasons we’ve discussed elsewhere, for now we continue to fade the idea that hikes are coming this year – particularly if the US and Iran can maintain a tenuous peace through year-end and keep a lid on oil prices – and we’d argue the more notable takeaway from the meeting was Warsh staying true to his desire for “regime change” at the Fed, starting with a dramatically slimmed down official FOMC statement that begins the transition away from “forward guidance” (i.e. managing rates by informal jawboning).

Investors chose to once again interpret Warsh as moving the Fed in a more hawkish direction (partially thanks to his new task force to review the central bank’s ~$7 trillion balance sheet, whose size he has often criticized) and reacted accordingly, pushing stock indices to their worst “Fed day” move for any new Fed Chair since 1994.

One week on from the sudden forced removal of Anthropic’s Mythos-class models from public access, the situation remains unresolved (though Bloomberg reports some early users still have access).

As the frontier AI lab wrangles with the Commerce Department on the issue, President Trump indicated that no G7 countries will receive a carve-out from export controls on the model, which in our view should be seen as a warning shot for the strategic value the US ascribes to its lead in frontier intelligence (and which shouldn’t be surprising to readers of this newsletter).

In a similar vein, Secretary of War Pete Hegseth ramped up recent critical commentary of NATO in a speech this week, calling for a new 6-month DOW review of the US-NATO relationship, with a goal of moving toward a “NATO 3.0,” where Europe shoulders more of the financial burden for its own defense.

Meanwhile, following months of pressure from the Trump administration and biweekly half-serious threats of a ground invasion, Cuba initiated a sweeping privatization campaign this week that will represent the most significant shift in the country’s economy since Fidel Castro took power nearly 70 years ago, marking the latest win in the White House’s aggressive campaign to exert influence across Central and South America.

Elsewhere in US-led trade restrictions, Commerce Secretary Howard Lutnick suggested that Dutch lithography giant ASML – which essentially holds a monopoly over the most complex and critical technology required for producing advanced semiconductors – violated export controls on its key EUV technology by allowing a machine to make its way into China. The company denied the claims, which we note appear to be mostly a rehashing of reports from late last year.

Meanwhile, the wartime economy – and its re-run of the Freedom’s Forge playbook – got its latest nudge forward this week, as General Motors is reportedly in talks to supply weapons parts to defense contractor Lockheed Martin.

It was a typically boring bear market week for bitcoin’s price action, as the orange coin hovered in the low $60,000 range once again. In response, bitcoin continued functioning exactly as intended, with target mining difficulty adjusting downward for the 11th largest drop on record.

However, the institutional asset management world continued to ram up its bitcoin-linked offerings, as BlackRock’s BITA ETF (a bitcoin derivatives strategy targeting 15-25% in yield through covered calls) officially launched, and Franklin Templeton filed for two new ETFs that look to funnel dividend payments into bitcoin purchases rather than traditional equity reinvestment.

It wasn’t as quiet a week for the bitcoin treasury complex, as Strategy’s popular STRC preferred stock took its largest dip from par since inception, all the way down to ~$82 before retracing a bit. This is probably at least partially the result of a liquidation cascade from “looping” strategies popular with “DeFi” borrowers, but it no doubt complicates the comparisons of these vehicles to stable money market funds.

Regulatory Update

The Bitcoin Policy Institute team made a noteworthy trip to Taiwan to meet with policymakers regarding bitcoin’s strategic value to the closely-watched island nation. The trip came in response to BPI’s policy paper on the topic earlier this year.

Back in the States, Congressman Nick Begich conducted a lengthy interview walking through the rationale for and mechanics of his recently proposed ARMA legislation that would see the US accumulate a national reserve of 1 million bitcoin.

On the opposite side of the spectrum, Illinois passed a new bill that will levy a first of its kind 0.20% tax on essentially all bitcoin activities taking place in the state.

Key banking regulators including the Fed, Treasury, FDIC, and OCC published their first rulemaking proposal for GENIUS Act-compliant stablecoins. Among other points, the proposal would require full bank-style KYC for all onshore stablecoins.

Noteworthy

The UK announced a blanket ban on social media use for children under 16. While we have some sympathy for the deleterious impact of doomscrolling on young minds, we can’t help but wonder if this might be a convenient pretext for something more invasive.

It’s just a faint, distant memory now, but way back in the halcyon days of 2016, a billion seemed like a lot. A decade later, we now have more than a dozen publicly traded trillion dollar companies (with a few more likely headed down the pipe later this summer), one of which just officially minted history’s first trillionaire in Elon Musk (you might have heard of him). There’s no doubt something to be said here about the Cantillon effect and the inexorable erosion of fiat currency driving headline figures that become increasingly unfathomable (O/U first quadrillionaire by 2040?), but there’s also much to be said about what the rise of SpaceX represents, not just for the American spirit but also as an illustration of the unrivaled depth of American capital markets and the kinds of innovations they can be marshaled to enable. That degree of capital formation is, for now, still the exclusive purview of the American empire (don’t look now, but CQQQ is red YTD and on a 5-year lookback), and SpaceX’s rise and legitimately impressive set of technical accomplishments testify to the fact that that deep liquidity can still fund bleeding-edge physical projects that truly push the frontier of human capability rather than just the nth delivery app or prediction market.

None of this is to say that SpaceX is necessarily a buy here (mind the lockup expiration schedule), nor is it to suggest that America’s rivals aren’t quickly making meaningful strides of their own. But if the current administration, or whatever faction of the Deep State is presently operating the controls, is truly determined to use every trick in the book to win back the critical physical supply chains that have left the US uncomfortably dependent on foreign counterparties, then SpaceX is a meaningful indicator that the old dog can still hunt. That “giant sucking sound” you hear is a half-century of foreign trade surpluses reversing, of dollar rails ceasing to be a public good subsidized by the beneficence of the taxpayer, and of industrial policy starting to gain real momentum. To be sure, history suggests that this will bring federal backstops, government grants, fiscal largesse, expanding deficits, and (in some form) money printing, so we continue to think it wise to consider how that flood of liquidity may flow to certain highly scarce assets over time (particularly assets where Americans already have a favorably skewed ownership share vs the world at large).

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

Selected Portfolio News

Giga Energy launched a new Power Systems Market Data Tool to give site operators stronger transparency into key pricing and market metrics:

Media

AnchorWatch’s Co-Founding team of Rob Hamilton and Becca Rubenfeld joined the Blockspace show to discuss prediction markets, bitcoin, and more.

Market Updates

After years of anticipation and more than a few side quests along the way, SpaceX finally went public on Friday in the largest initial public offering of all time, making Elon Musk history’s first trillionaire.

It’s not clear if the liquidity drag ostensibly created by this mega-offering will abate as the stock enters regular way trading, but with OpenAI adding its own confidential S1 filing to the mix this week, we think we may have to wait a little longer to get any clarity there.

What’s equally unclear is whether the two-sided kayfabe between the White House and the IRGC is ever going to advance any further, as President Trump this week responded to Iran’s unilateral termination of talks with a promise that the US will soon seize Kharg Island and the country’s oil infrastructure…followed by a claim that the war is basically over subject to dotting some i’s and crossing some t’s, comments that pushed oil to its lowest level since early March.

For what seems like the fifteenth time, though, the two sides appear to have very different ideas of what they’re actually signing, even as Iran’s foreign minister says a deal has never been closer.

Perhaps most notably, Treasury Secretary Scott Bessent ramped up rhetoric about using seized Iranian assets to fund the reconstruction of America’s Persian Gulf allies battered by Iranian strikes, the latest escalation of dollar weaponization we would only expect to ramp further from here.

That weaponization has certainly stimulated various attempts at throwing off the dollar yoke, but the South China Morning Post ran a noteworthy piece this week on the practical limits of the de-dollarization process for China and Russia, including a variety of unavoidable frictions and bottlenecks exacerbated by secondary US sanctions.

Elsewhere in US gambits for shoring up global hegemony, the Trump administration is reportedly seeking to purchase the Chagos Islands from Mauritius in an attempt to gain permanent control over Diego Garcia air force base, a key strategic asset in the Indian Ocean whose status has been thrown into question by the UK’s decision to give up its claim on the territory.

On the same thread, the Wall Street Journal published a piece on the growing US-China tug of war for access to and control over critical minerals production in Brazil, which boasts the world’s second-largest rare earths reserves but essentially no active production.

Meanwhile, right on schedule, President Trump said he’s “not looking to renew” the USMCA governing North American trade given that “we don’t need anything Canada has.” While the disgruntled, oil-rich citizens of Alberta may disagree, the move comes as an unsurprising escalation in the US’s attempt to rewrite trade rules with its northern neighbor.

Domestically, the latest inflation numbers came in firm this week, with headline CPI breaking 4% for the first time in three years, driven largely by energy as expected (though for what it’s worth, the M/M moves have been trending down since the start of the Iran war). The core (ex-energy) index hit 2.9%, with both numbers matching consensus.

Headline PPI was hotter than expected, with producer prices rising 6.5% Y/Y for the highest level since November 2022, though Core PPI was a bit below expectations.

Despite the energy-driven pressure, a few key dynamics appear to be keeping the upward impulse in check to some degree. Most notably, oil analysts suggest (as we’ve highlighted in previous issues) that China has dramatically curbed its imports and has likely been opting for material SPR drains over domestic demand destruction, limiting upward pressure on prices for now.

Of course, an historic US SPR drain is also doing a good deal of the legwork here, with American reserves set to drop to their lowest level since 1983. However, US Energy Secretary Chris Wright suggested traffic through the Strait of Hormuz has been “rising very meaningfully”; maybe the 15th time’s the charm.

Following months of breathless tech bro fanfiction and sci-fi guerrilla marketing, Anthropic finally publicly released its latest model Fable 5, which the company says is a version of Mythos with certain cybersecurity and ethical guardrails. Despite the shackling, the model appears to outperform basically everything.

At the same time, prominent OpenAI researcher Noam Brown published a thought-provoking piece arguing that we don’t actually know the capability limits of the current frontier models because it’s effectively too expensive to measure properly over sufficiently long time horizons, suggesting the ceiling on scaling laws may remain very far out.

Alongside the Fable release, Anthropic CEO Dario Amodei – who has deep ties to the Effective Altruism movement, which readers may recall was made famous by none other than Sam Bankman-Fried – published a new essay arguing for various EA-tinged social interventions to offset the assumed impact of AI, including extensive unemployment and underemployment insurance, as well as long-term economic support programs.

Right or wrong, this strain of proposal appears to have gained significant steam in many prominent circles, which longtime readers may recognize as the sound of the dormant printer trying to rev back up.

These kinds of proposals will need to confront the stark reality of the US’s existing base of liabilities, which was highlighted again this week by the Social Security administration’s announcement that it will now hit a shortfall by 2032, one year earlier than previously expected (intrepid observers may note that this estimated date gets one year closer with each passing year, which doesn’t paint a great picture for 2029).

Either way, Anthropic pulled access to the models just a few days later following a request from the Commerce Department on the back of reports that some users had been able to jailbreak Mythos. We’ll let readers decide how much of this is legitimate concern vs. a ploy to pave the way for stricter control of frontier models to limit distillation and build leverage (as another prominent Effective Altruist once said: if you’re good at something, never do it for free).

After another massive puke last week, bitcoin remained rangebound in the low $60,000 range all week as ETFs have continued to see consistent outflows, bringing cumulative ETF net flows to July 2025 levels.

That said, BlackRock filed an 8A form for its upcoming bitcoin income ETF, pointing to a likely launch within the next week.

Regulatory Update

US Senator and longtime bitcoin advocate Cynthia Lummis – who will not seek re-election this fall – reiterated her support for a strategic bitcoin reserve, noting that the US should be accumulating bitcoin “loudly, by law.”

Noteworthy

Bitcoin startup Second launched Bark, its implementation of the Ark protocol, on mainnet this week, potentially adding another pathway for improving self-custodial bitcoin payments UX. The implementation quickly saw its first major potential application in the form of a simple proof of reserves scheme for Cashu ecash mints.

FTX Founder Sam Bankman-Fried, currently serving a 25 year sentence for fraud and Various Ponzi Activities, officially applied for a pardon from the Trump Administration. Tinfoil hat enthusiasts may want to keep tabs on this one.

It was a tough week to own – checks notes – anything, as stocks violently gave back a few weeks of gains, gold broke its 200 day moving average, and bitcoin did, well, bitcoin things. With a divided and potentially net-hawkish Fed making its debut next week, a generational reworking of who wears the pants in the dollar system coming into view, and fund managers pre-positioning for allocations into the three largest IPOs of all time, the road ahead will no doubt be bumpy, even as many technical and onchain indicators seem to point to bottom formation sometime in the near future. But at the risk of repeating ourselves, on weeks like this, we like to assess what’s actually going on in the world, and what we see is an administration that’s not shy about spending at historically aggressive levels on top of historically high public debt to reignite the traditional business cycle (a dynamic that has historically been quite positive for bitcoin) and shore up long-term US hegemony; a phase shift in technological capabilities paralleled by only a few moments in history, which will dramatically disrupt legacy capital markets in either the bull or bear case; an ongoing, radical shift away from an international trade system that assumed open capital markets and trusted sovereign partners; gradual, persistent improvements in the base protocol and user tooling needed to make bitcoin robust and extend its utility; and legacy institutions like Charles Schwab and Fannie Mae increasingly incorporating bitcoin offerings even in the face of terrible price action while the US Treasury Secretary frames a strategic bitcoin reserve as a matter of national security. I don’t know what to tell you, man; seems bullish.

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

Selected Portfolio News

Strike launched new anti-phishing tools to prevent fraud and social engineering:

Media

Unchained published a guide on moves bitcoin holders can make to maximize opportunity during a bear market.

Market Updates

After a monthslong soap opera that jumped the shark long ago, Iran decided to take its toys and go home on Monday, declaring negotiations over and promising to “completely block” the Strait of Hormuz.

When asked about how he’d respond, President Trump shrugged it off, suggesting he doesn’t care and that the whole thing has become “very boring.” Interestingly, the oil market seemed to agree, with both WTI and Brent flattish on the week.

While negotiations in the Gulf continue to stall out, fundamental US economic data – at least at the macro level – continued to look better, as the US Manufacturing PMI increased M/M again to the highest level in four years.

Meanwhile, JOLTS job openings data ripped to a multi-year high, and Non-Farm Payrolls also came in much stronger than expected to close out the week (though once again, the decomposition under the hood is less exciting).

This last data point, however, sent markets into a tailspin as investors began to panic about the prospect of a stronger labor market potentially justifying rate hikes at the upcoming FOMC meeting next week, pushing the Nasdaq to its worst single day performance in a year as anything related to semiconductors or AI got shellacked.

Worries about AI being cancelled may be somewhat premature, though, as Anthropic published an article this week suggesting they are now seeing the beginnings of “recursive self-improvement,” a long-awaited milestone among AGI Truthers that describes the state at which frontier models are capable enough to train and improve their own next iterations. Scientists accordingly set the Paperclip Maximizer doomsday clock to 11:59pm.

In response to the rapid progress in AI, Senator Bernie Sanders previewed an upcoming bill that would have “the public” (a classic abstraction that somehow never actually includes your average American) take a 50% ownership stake in key frontier AI labs.

At the same time, new reports indicated that prominent Sanders ally Donald Trump – hey, wait a minute – and OpenAI have already discussed the federal government taking a stake in the company.

While AI continues to eat more of the economy, the traditional private markets backdrop has remained rough, with Blackstone once again gating redemptions out of its flagship BCRED fund as withdrawal requests jumped to a new high of ~10%. Across the pond, Partners Group reported similar redemption pressures and was also forced to limit withdrawals.

The global liquidity backdrop has remained mixed and has not been getting any help out of China, where the PBOC cut its daily liquidity injection operations to zero for the first time in two years.

The road may not be getting any easier for the domestic Chinese economy, as the European Union officially prepares new restrictions on Chinese imports amid what policymakers have acknowledged is an unsustainable trade deficit between the two parties.

As the world weighs its dependence on Chinese supply chains, the Wall Street Journal ran a feature this week on various recent engineering developments that may pave a path to reduced reliance on Chinese rare earth minerals and critical materials.

In what may be a sign of growing stress brought on by the trade recalibrations of the past couple years – as well as a deep and ongoing decline in the local real estate market – Chinese authorities have begun cracking down on offshore trading and ownership of US equities.

Elsewhere in the rapidly shifting geopolitical landscape, notably pro-Tump Colombian candidate Abelardo de la Espriella surprisingly took the lead in the first round of Presidential voting this week. The next round of elections to replace outgoing anti-Trump incumbent Gustavo Petro will take place later this month.

To the north, reports surfaced this week that the USMCA (the North American trade agreement that replaced NAFTA) will miss its July 1 renewal deadline, a potential headline we’ve previewed in prior issues and a development that will throw the already-strained trade relationship between the US and Canada further into limbo.

The CEO of Payments Canada gave a noteworthy speech this week in which she acknowledged that payments are tools of “economic statecraft,” and flagged that 80% of Canada’s cross-border payments are routed through US correspondent banks. We suspect the USMCA situation may be setting up a scenario that makes the implications of this reality more concrete.

On the bitcoin front, Schwab officially launched 24/7 bitcoin futures trading on its Thinkorswim platform as the $13 trillion stalwart continues to ramp up its bitcoin offerings (as an aside, it may be worth noting that turning on persistent trading did not require a blockchain).

Just under a year after the FHFA initiated its exploration into bitcoin as an element of mortgage collateral packages, the first Fannie Mae-conforming bitcoin-backed mortgage was officially issued in the wild.

Despite the ongoing drumbeat of positive real-world developments, bitcoin’s price took it on the chin again this week, falling back to the ~$60,000 level and fighting for its life to hold onto some key technical levels (though breaching these levels has historically marked roughly the bottom of prior bear markets).

Regulatory Update

Treasury Secretary Scott Bessent confirmed the Treasury Department is continuing to take steps to build out the strategic bitcoin reserve, framing the topic as an element of national security.

The Treasury, meanwhile, enacted new sanctions of Iran’s largest crypto exchange, which processed over half of Iran’s digital assets flows last year.

Six Senators sent a letter to the Fed, FDIC, and OCC calling for a reconsideration of the Basel framework’s overly punitive risk-weighting of bitcoin.

Noteworthy

Bitcoin treasury giant Strategy sold 32 bitcoin this week, marking the company’s first small sale since 2022. The sale was previewed on the company’s last earnings call as an “inoculation” of the market to the possibility that Strategy could sell bitcoin from time to time; if so, the patient appears to currently be coding.

Bitcoin open source funding organization Brink announced a new grant for developer Conduition, who will focus on post-quantum security upgrades for bitcoin.

Zcash, a privacy-focused altcoin whose advocates have long criticized bitcoin for insufficient privacy guarantees, took a drawdown of nearly 50% this week as developers revealed a hidden inflation bug that, thanks to Zcash’s privacy-maximizing design, was both undetectable for years and has effectively made the total circulating supply of Zcash unknowable. The bug appears to have been discovered by a simple Claude prompt.

Like world-renowned prize fighter Randy Marsh, the market keeps insisting it didn’t hear no bell, as equity indices pushed to new all-time highs once again and Treasury yields backed off even as a normalization of oil prices remains elusive and various data points for the lower-end of the K-shaped economy kept looking worse. S&P earnings have continued to rip higher powered by the AI buildout, though GDP figures aren’t yet reflecting the productivity miracle that we’re assured is just over the horizon (despite some very strong leading indicator data out of trucking), and in the meantime consumer credit delinquencies have continued to spike while disposable income seems to be falling off a cliff. We’re starting to see more direct responses to the anxieties and cognitive dissonance produced by this state of affairs, including both Silicon Valley-led calls for “dividends” (the sophisticated thinking man’s rebrand of stimmies) paid to the public from the AI buildout, as well as the more blunt instrument of just taking people’s stuff championed by leftist bulwarks like Zohran Mamdani. Meanwhile, in a move that couldn’t have more poetically captured the current moment, Treasury Secretary Scott Bessent proposed that the Treasury issue a new higher-denomination $250 bill bearing President Trump’s face to commemorate America’s upcoming 250th birthday, because as all great regimes throughout history have learned, all you need to do when affordability becomes a problem is add a zero (or two) to the local bills. We are far from calling any kind of top in the AI trade; if anything, we’d bet we’re closer to the front half of the game than the back half, particularly given the national security implications and the untold financial plumbing tricks up the sleeve of the Fed / Treasury nexus. That said, all signs continue to point to an increasing fragility of the social fabric that we think only has one real response, regardless of whether it wears a MAGA hat or a $300 Che Guevara T-shirt. This administration (and the next one, whatever it may look like) needs to keep the music playing on S&P earnings growth while managing the inevitable backlash that same dynamic will incite among those who don’t own a piece of the revolution, and we continue to think that combination of imperatives has clear long-run positive implications for bitcoin.

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

Selected Portfolio News

Strike significantly lowered loan minimums for users in Connecticut and Oregon:

Media

AnchorWatch Co-Founder and CEO Rob Hamilton joined the ARK Invest Bitcoin Brainstorm podcast to dig into how investors should think about quantum computing’s relationship to bitcoin.

Market Updates

President Trump spent the long holiday weekend teasing a deal with Iran, while also suggesting that all Persian Gulf countries – including Iran! – will be required to sign onto the Abraham Accords that normalized relations between the UAE, Bahrain, and Israel.

Trump’s “Why Can’t We Be Friends” proposal for Iran and Israel may have slim odds, but oil generally declined throughout the week on growing optimism that a deal is close, with reports throughout the week indicating that a framework has been established and now just needs Trump’s signoff (said another way, Lucy is currently holding the football in just the right spot, and Charlie Brown will definitely kick it this time).

Iranian state media suggested mid-week that a deal is indeed in sight, and that it would allow normalized traffic through the Strait of Hormuz managed by Iran and Oman, though the White House immediately dismissed this as fake news.

Former CIA Director (and therefore completely trustworthy source) David Petraeus suggested Iran is currently “in the process of blinking” in one of the most precarious games of chicken ever played, and President Trump shrugged off concerns about midterms, noting he can outwait Iran.

ExxonMobil executive Neil Chapman suggested someone needs to blink quickly, as global oil inventories will reach dangerously low, “unheard of” levels within weeks if the status quo persists.

Indeed, new data this week suggested that China is likely aggressively pumping out its petroleum reserves stock to forestall demand destruction from higher prices. And they’re not alone, as the US executed one of the biggest SPR drains in history this week, eclipsed only by last week’s outflow.

The bond market seemed less concerned about an oil apocalypse, though, as the US 10-year and 30-year both fell well below their recent 4.5% and 5% breakout zones.

Meanwhile, the latest Core PCE inflation reading – ostensibly the Fed’s favored metric for assessing inflation – printed in line with consensus at +3.3% Y/Y.

Recently exited Fed Governor and prominent low rates enjoyer Stephen Miran published an article arguing that core PCE inflation has also effectively been overstating true experienced price changes because of recent upticks in software pricing, as well as questionable measurement practices for software inflation.

Whether you think this reads as interesting and thoughtful analysis or classic goalpost-shifting to massage numbers favorably may depend on your relative affinity for Orange Man, but in any case Fed Governors Michael Barr and Chris Waller did not seem convinced by the logic, as both publicly signaled opposition to lower rates (as well as a smaller balance sheet) this week just as new Fed Chair Kevin Warsh takes the helm at the Eccles Building.

Despite the ongoing tension in the Middle East and a potentially divided Fed, equities continued to party like it’s 1999, with memory titan Micron officially joining the trillion dollar club. The company’s market cap has now tripled since the last local bottom on March 30th. At the same time, Dell announced blowout earnings thanks to a push for on-premise enterprise AI that drove the stock up to new all-time highs, also good for a ~2.5x in two months.

S&P500 earnings in general have continued to rip through the year, with FY26 forward estimates now up 24% Y/Y, reflecting basically unprecedented earnings growth outside of post-recession snapbacks.

Of course, the boom in public market valuations and corporate earnings continues to reflect only one part of the increasingly divided K in the economy, as credit card and auto loan delinquencies have continued to push to new post-2008 highs while the personal savings rate has declined to 20 year lows and some data show ongoing declines in real disposable income.

At the same time, the latest official estimate for Q1 real GDP was revised down by 40bps to just 1.6%, driven primarily by cuts to investment spending estimates (which is exactly the wrong place for downward revisions if you’re trying to run it hot).

Things may not be getting any easier for the lower rungs of the labor and services market, as OpenAI announced that an internal model has solved a complex math problem that has stumped human thinkers for 80 years, and Anthropic announced its latest fundraise at a valuation just under $1 trillion.

Prominent tech investor Brad Gerstner suggested this week that he’s working with the White House to address some of that underlying workforce anxiety via “very tangible and profound dividends” from AI gains paid out to the public.

But Comrade Zohran Mamdani has a different proposed solution for the wealth gap: in a preview of a policy response that may be coming to a city near you, the recently elected leader of the financial capital of the world announced his administration will “transfer ownership” from certain private landlords that he believes are mismanaging their properties.

Internationally, the US has continued to place strategic bets well outside the Strait of Hormuz that may have downstream implications for energy, resource access, and leverage over China, with new reporting this week indicating that the Pentagon has continued to ramp up its Navy presence around Cuba.

The US and the Philippines have continued to work on finalizing the massive shared economic development zone announced last month, though with some controversy around the US’s request for diplomatic immunity in the region.

To the north, Canada officially entered a technical recession, which is probably not a fantastic negotiating position going into USMCA renegotiations in July.

While AI bottleneck stocks continued to trade like 2017-era ICOs, spot bitcoin ETFs have experienced 10 consecutive days of outflows, a new record that included a $1.3 billion single IBIT block trade. That said, despite the selling pressure, bitcoin has largely continued to trade sideways over the past several weeks.

Regulatory Update

Texas appointed a five member advisory committee for the state’s bitcoin reserve activities, including the CFO of Cleanspark and a former senior member of one of the largest pension funds in the state.

The CFTC approved the launch of the first onshore bitcoin perpetual contracts. These derivatives have long been a popular way for traders to express levered bets on bitcoin price movements via offshore exchanges.

The long-delayed CLARITY Act appears to have run into another major roadblock, as JP Morgan chief Jamie Dimon declared – alongside some choice words for Coinbase CEO Brian Armstrong – that the banking lobby will “fight it” aggressively from here.

Noteworthy

The week saw a variety of exciting technical updates for bitcoin, including significant progress on the use of secure enclaves to minimize trust assumptions needed for Cashu, an implementation of ecash and a promising vector for improving mass market bitcoin-denominated payment UX.

Similarly, the latest Bitcoin++ technical conference highlighted the ways that emerging protocol Ark can interoperate with the lightning network to further expand the innovation surface for bitcoin payments and onboarding.

It was another week of whipsawing bond yields, blowout AI results, and the longest “final stage” discussions of any Artful Deal in recent memory, but to our eyes, the most noteworthy takeaway from the week was the apparent pilot launch of “Hormuz Safe,” a new “insurance” program that Iran is attempting to foist on ships looking for safe transit through the heavily contested waterway in the Persian Gulf. While this looks to be basically a protection racket and we don’t expect any version of the long-run equilibrium to include Iran charging any kind of toll on transit over international waters given both the US and China oppose this construct, what’s particularly notable about the program – whose existence was confirmed by no less than Bloomberg – is that its operators are requiring payment exclusively in bitcoin. Not dollars, gold, CNY, or stablecoins, but the orange coin that refuses to die and which has long been labeled “money for enemies” by its most ardent advocates. To be clear, we’re not encouraging any form of US sanctions evasion (and realistically no form of payment including Rai stones would make a difference in avoiding the Treasury’s Eye of Sauron regardless), but we think the market has underappreciated the validation of the bitcoin thesis that this headline implies. Iran has not chosen bitcoin as a means of settlement here because it wants to evangelize sound money to the world or to shill users its ref link (10% off your first trade with code AYATOLLAH), but because it’s the only globally distributed exchange network whose design ensures that it can be accessed without permission or censorship, with transactions natively denominated in a currency that cannot be arbitrarily seized or diluted by any counterparty. While we’re not bullish on the success of Hormuz Safe, we think this attempt to use bitcoin in a geopolitically adversarial and high-stakes environment has readthroughs that all individuals, companies, and countries (including and especially the US) should consider very carefully as the old world order fractures into less trusted and more heavily controlled trade blocs.

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

Selected Portfolio News

Hodl Hodl launched support for trades over the lightning network, a long-awaited upgrade for the P2P trading experience:

Media

CleanSpark CBO and Ten31 Advisor Harry Sudock appeared on What Bitcoin Did to discuss evolving credit and treasury strategies built around bitcoin.

Market Updates

The neverending story continued to asymptotically approach, but not reach, a conclusion this week, as President Trump said talks with Iran are in the final stages, but the US will hit Iran “very hard” if they can’t reach a deal soon.

As the tenuous ceasefire dragged on, the US Treasury continued to tighten the screws on the IRGC and highlight the growing bifurcation of the dollar system, with Secretary Bessent announcing new OFAC sanctions on Iran’s “shadow banking system.”

Very notably amid the chaos and financial weaponization, Iranian state media reported early in the week (with amplification from reputable outlets including Bloomberg) that the country’s economic ministers have been working on a maritime “insurance platform” for transit through the Strait of Hormuz with payment to be made in bitcoin (rather than gold, yuan, or stablecoins).

Oil prices continued to hover near multi-year highs on the uncertainty, sustaining last week’s upward momentum on sovereign bond yields. The US 10-year put in its highest level since January 2025 and the 30-year cleared a 20-year peak as the MOVE bond volatility index rose to its highest point since the start of the war.

However, in what has become a recurring pattern that leading global liquidity observer Michael Howell has termed “Whack-a-MOVE,” yields and bond vol retraced aggressively later in the week as unnamed sources once again suggested the US and Iran are reviewing the final draft of a deal.

Equity indices also continued to climb to new all-time highs by the end of the week. Asked if he’s worried about the possibility of an AI bubble on the back of this price action, Amazon founder and aspiring Rocket Man Jeff Bezos hit us with the classic “lol, don’t worry about it babe.”

That said, a report late Friday of a foiled IRGC attempt to assassinate Ivanka Trump may (false flag or not) muddy the water here just a bit, and as of Saturday morning all the scuttlebutt seems to point in the direction of resumed hostilities over the long weekend.

The minutes from the Federal Reserve’s latest FOMC meeting suggested growing appetite for rate hikes if Hormuz-driven inflation remains elevated, confirming investor fears from last week’s hot CPI print.

That made it a particularly interesting week for new Fed Chair and staunch Low Rates Enjoyer Kevin Warsh to be officially sworn into his post. Warsh’s ceremony notably saw President Trump reiterate his desire for Warsh to remain independent – as long as he “lets the economy boom” and doesn’t worry about a pesky little near-term energy shock.

Warsh may get some help here from the energy complex once (if) the situation in the Persian Gulf is resolved, as Iraq is reportedly in talks with OPEC – following the UAE’s groundbreaking decision to exit the cartel after more than 60 years – to boost oil production to 5 million barrels per day (vs just 1.4 million today and ~3.5 million before the war).*

Meanwhile on the homefront, retail earnings this week generally painted a picture of a resilient consumer despite the spike in oil prices, with both Home Depot and Target calling out surprising end market strength YTD. That said, WalMart was more downbeat, highlighting the impact of core goods inflation on its core demos.

The US’s messy re-shoring effort got some more positive news this week, as Century Aluminum confirmed it will move forward with building the first new aluminum smelter in the US in nearly 50 years to more than double annual domestic output, in partnership with the UAE (whom attentive readers may recall just exited OPEC and received a USD swap line).

The financial statecraft angle that the Trump administration has used for moves like those swap lines may face a challenge soon, however, as two Senators introduced a bipartisan bill to restrict the Treasury Department’s use of the $200 billion+ Exchange Stabilization Fund, which has been a key pillar of Secretary Bessent’s international agenda.

Overseas, Russian President Vladimir Putin made his own visit to Beijing following the much-publicized Trump trip last week, though notably the two sides still have yet to agree on a critical oil and gas pipeline deal.

Down south, the US officially indicted former Cuban President Raul Castro following months of clear overtures toward the island nation, with President Trump suggesting he’ll be the one to finally intervene in Cuba after decades of US appetite to do so.

On the same theme, Secretary of State Marco Rubio rattled his saber at Bolivia in defense of Our Sacred Democracy, as the US continues to clearly indicate its desire to dramatically increase its influence in Latin America.

Elsewhere in the ongoing expansion of wartime state power, following the Department of War’s well-publicized spat with AI frontier lab Anthropic several months ago, the Trump administration reportedly prepared an executive order that would, uh, “encourage” AI labs to provide the DOW access to their latest models 90 days ahead of the public. However, the President said he would wait to sign the order for now, noting concerns it could reduce the US’s edge over China.

After years of anticipation, SpaceX’s S-1 filing for its upcoming IPO was publicly released this week. The offering may have negative near-term implications on the margin for investor liquidity as many public markets investors may need to source funds from elsewhere to participate in the nearly $2 trillion company, but a noteworthy element of the filing for our purposes is the 18,712 bitcoin held on the company’s balance sheet, apparently purchased around the $35,000 mark.

Mubadala, one of the UAE’s key sovereign wealth funds, increased its reported bitcoin holdings by 16% during the first quarter despite the orange coin’s early year drawdown and chaos in the Gulf throughout March.

Trump Media and Technology Group, meanwhile, moved over 2,000 bitcoin in a transaction that was widely interpreted as a sale, though the company told Barron’s it was only transferring rather than selling the bitcoin.

*These em dashes were proudly handcrafted by meatspace laborers in the United States of America. No GPUs were harmed in the production of these sentences.

Regulatory Update

White House digital assets advisor Patrick Witt suggested again this week that an update on the Strategic Bitcoin Reserve will be coming soon.

It’s unclear if this is what Witt was alluding to, but Congressman Nick Begich introduced the bipartisan American Reserve Modernization Act (ARMA) this week, an update of last year’s BITCOIN Act with 16 cosponsors that would direct the US Treasury to acquire a 1 million bitcoin reserve over five years via proceeds from a statutory gold revaluation.

President Trump signed an executive order directing the Fed to consider opening up master accounts to fintech and crypto firms, a long-elusive goal of many companies outside the major tier-1 banks.

Despite many false starts, the CLARITY Act has continued to see delays, failing to pass before the Memorial Day recess and leaving a tight timeline for passage before the summer.

Minnesota passed a law explicitly allowing banks and credit unions to engage in digital asset custody.

Noteworthy

Rabobank strategist Michael Every, who has consistently seen the ball on the global realignment of the past 18 months more clearly than most, published a new paper on the potential for increasingly bifurcated energy and commodity markets, challenging the “law of one price” arbitrage assumptions that have dominated post-Cold War international trade.

This rally has everything: transitory inflation, new all-time highs for Cisco, permabears capitulating into semis at the pico-top, regime change at the Fed. Another week of wildly bullish moves across the stock market and AI complex was capped by a violent selloff on Friday, as investors everywhere googled “Thucydides Trap” after the latest Trump-Xi meeting and didn’t like what they saw in the top hits (or in the “@grok is this true” follow up). The latest headline inflation data gave the market even more cause for concern, with both CPI and especially wholesale price inflation coming in above estimates and pushing more Fed rate cuts firmly out of consensus for at least the rest of this year, which is an interesting setup considering that Rate Dove Extraordinaire Kevin Warsh officially cleared Congressional confirmation to take up the helm as next Chairman of the Federal Reserve. President Trump’s totally independent and impartial pick to lead the central bank has long emphasized his view of an oncoming productivity boom that will free up capacity for lower benchmark interest rates, and as monetary policy becomes a more overt tool of statecraft, we’re not convinced that a few hairy data points are going to be enough to derail the pro-growth, pro-reshoring agenda, particularly given the precarious state of the US federal interest burden, which now demands some combination of suppressed rates, short-end funding, captive buyers from friendly trade surplus countries, and a ripping GDP denominator to remain serviceable. To be sure, the long end may try to revolt – and it certainly got a little frisky this week – but longtime readers may recall that when push comes to shove, we have tools for that. As a popular saying goes, there are bonds in the stocks stonks, which is to say that higher / lower rates on benchmark debt flow through to lower / higher long-duration discounted values of cash flows to equity holders (read: stock prices), and those values can only be allowed to fall so far before the game is fundamentally imperiled (higher rates / lower stock prices → lower capital gains tax receipts and high-end consumer spending / less headroom for hyperscaler capex → higher sovereign debt yields / lower forward GDP growth and leverage against China → rinse / repeat). If we were still in the world of monetary technocrats studiously applying the (dubious) wisdom of the Phillips Curve, we might have more sympathy for this week’s market reaction, but the lesson of the past 6 years and especially the last 12 months is that we are definitively not in Kansas anymore, and we think that many investors still have yet to fully catch up to that reality.

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 appeared on What Bitcoin Did to discuss his long term vision for Strike, Twenty One, and bitcoin’s ongoing integration into traditional capital markets.

Giga Energy Co-Founder and CEO Matt Lohstroh appeared on popular tech and finance show TBPN to dig into the company’s explosive, capital-efficient growth as a leading HPC infrastructure provider.

Fold Founder and CEO Will Reeves participated in a panel on bitcoin financial services at this year’s Bitcoin Conference in Las Vegas.

AnchorWatch Co-Founder and COO Becca Rubenfeld joined the Galaxy Brains show to discuss the evolving custody landscape and Becca’s personal story.

Market Updates

After more than a month of playing footsie on a potential deal with Iran, President Trump kicked off the week by lamenting that the fragile ceasefire is on “major life support” after rejecting Iran’s latest proposal to end hostilities.

With Iranian texts left on read, Trump crossed the Pacific for a pivotally timed two-day summit with Chinese President Xi Jinping. Trump packed light for the trip, bringing only a few dozen of America’s most significant business leaders (whose collective market cap is roughly equivalent to the entirety of the Chinese stock market) along for the ride.

The two aspiring Great Men of History discussed avoiding the Thucydides Trap (which may or may not actually be a thing), whether Trump would defend Taiwan (but he’s not telling), and the potential for China to “open wider” to business with more American companies (potentially like a crocodile opens wider for its dinner).

With oil still hovering firmly above $100, Treasury Secretary Scott Bessent suggested China is working behind the scenes to lean on Iran for a resolution in the Strait of Hormuz. All parties involved in this week’s talks reportedly agreed that they want to see normal oil flows restored as soon as possible, including no future where Iran extracts tolls from ships in the waterway.

The situation has continued to pressure China domestically, as the country’s independent oil refiners (long-time key customers of Iranian oil) slashed their output by more than 50% in April on the back of depressed margins. In the meantime, China has agreed to buy more oil from the US.

Also of note from the week’s talks were comments from US Trade Rep Jamieson Greer, who indicated that exports of rare earth minerals from China have returned to “better levels” over the last few months.

Back on the homefront, the guns continued to impinge on the butter, as the latest CPI reading for April came in at 3.8% (including 2.8% ex food and energy), good for the highest level in a few years. The latest PPI also printed at +6% annually, its highest reading since 2022.

The resurgent inflationary pressure collectively ignited fears that the Federal Reserve’s cutting cycle may now be at risk, with the market increasingly pricing in near-term rate hikes.

Secretary Bessent was unconcerned, noting that he forecasts “substantial disinflation” ahead after just “one or two more” hot prints. You might even say it’s…transitory?

The bond market was less convinced, as the 10-year Treasury yield convincingly broke 4.5% – a level which seems to have historically been a line in the sand for the Trump administration – for the first time since the Tariff Tantrum, closing the week above 4.6% while the 30-year reached a new post-Financial Crisis high.

All that said, so did equities (before giving some back on Friday).

Overseas bond markets got even more frisky on the week, with yields on JGBs, Bunds, Gilts, OATs, and probably every other overwrought foreign bond nickname you can think of all entering the dreaded banana zone.

Against the intermittently squirrely bond market backdrop, the Treasury Borrowing Advisory Committee introduced a proposal for the US Treasury to, for the first time, begin acting as a lender into the Treasury repo market as a means of using some of the TGA’s excess cash to shore up repo market volatility. For those keeping score at home, this would mean the Treasury may begin lending against its own debt in the name of market stability.

Amid a growing bond market kerfuffle, Kevin Warsh was officially confirmed to the role of Fed Chairman this week. We’ll wait to see if the SOFR shorts are right that Warsh will pivot on a dime to raising rates and allowing the bond vigilantes to take the day, but we’ll just say we have our doubts.

The sovereign debt volatility probably won’t improve the backdrop for private credit, which saw more negative headlines this week as KKR’s largest private credit fund held by individual investors reported a $560 million loss in Q1, roughly ~10% of fund NAV. The company said it will invest another $300 million into the fund to boost confidence as default rates increased over 250bps to 8.1% in the quarter.

Elsewhere, Apollo is reportedly in talks to sell off MidCap Financial, its $3 billion publicly listed private credit fund, which also saw default rates jump last quarter.

While the market got wobbly late in the week as bond yields ripped, the latest Empire State Manufacturing Index for May surged M/M to a four-year high, the latest data point highlighting accelerating industrial activity in the US.

Overseas, the memory market, an increasingly constrained chokepoint for the AI race that has become the main de facto driver of GDP and national security, faced another potentially massive kink this week as thousands of workers at Samsung threatened to strike over compensation disagreements. A top South Korean policymaker suggested that companies like Samsung – which has swiftly become one of the most valuable in the world – should pay everyone in the country a “citizen dividend” from their recent windfall.

While we haven’t heard much about US territorial expansion recently, BBC reported this week that the US has been in talks to open three new bases in Greenland, all of which would be formally considered sovereign territory. At the same time, President Trump suggested he is “seriously considering” making Venezuela the 51st state.

Regulatory Update

After an apparent compromise was reached last week on the long-delayed CLARITY Act, the American Bankers Association sent a letter to all banks urging opposition to the bill due to the law’s treatment of stablecoin yield.

Notably, the latest version of the bill maintains much of the core language from the Blockchain Regulatory Certainty Act to limit liability for developers of noncustodial software, though the draft also contains notably vague terms that could still be used to prosecute developers under money transmission laws.

Despite those concerns, police unions and politicians have publicly argued that the legislation does not go far enough in applying legal liability to developers (though we can surmise from contextual clues that many of these commentators are, um, insufficiently informed about small matters such as how bitcoin actually works).

Regardless, the bill successfully made it out of committee this week, much to the chagrin of certain tribal elders.

The Financial Services Committee introduced the Price Stability Act, which would remove “maximum employment” from the Fed’s dual mandate (which they’re forgetting is actually a triple mandate, the third leg of which – moderate long-term interest rates – is arguably the most critical at the moment).

President Trump and his associated family entities disclosed purchases of Coinbase, Strategy, and MARA during the first quarter.

Noteworthy

Major public bitcoin miner MARA signaled support for BIP-54, a generally popular bitcoin improvement proposal colloquially known as the “Great Consensus Cleanup,” which addresses a variety of small but important long-running vulnerabilities to bitcoin.

Strategy’s STRC preferred stock reached a record for daily volume this week, driving purchases likely north of 15,000 bitcoin through Friday.