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.

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

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

Selected Portfolio News

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

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

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

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

Media

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

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

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

Selected Portfolio News

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

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

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

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

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

Selected Portfolio News

Fold launched its new Fold Business platform:

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

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

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

Travel

• Bitcoin 2026, Las Vegas, April 27-29

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

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

Selected Portfolio News

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

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

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

Media

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

Noteworthy

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

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

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

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

Travel

• Bitcoin 2026, Las Vegas, April 27-29

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

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

Selected Portfolio News

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

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

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

Media

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

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

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

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

Market Updates

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Update

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

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

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

Noteworthy

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

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

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

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

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

Travel

• OPNext, New York, April 16

• Bitcoin 2026, Las Vegas, April 27-29

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

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

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

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

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

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

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

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

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

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

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

Blockchains Don’t Scale

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

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

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

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

Say It With Me: Blockchains Don’t Scale

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

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

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

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

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

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

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

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

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

Right Back Where We Started

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

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

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

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

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

Better Banking Through Chemistry

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

Some Background: Databases vs Blockchains

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

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

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

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

Bearer Assets

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

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

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

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

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

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

24x7 Availability

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

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

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

Programmability

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

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

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

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

Interoperability

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

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

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

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

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

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

Better Interbank Settlement?

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

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

Upgraded Cross-Border Flows?

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

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

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

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

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

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

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

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

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

A Ledger Is All You Need

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

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

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

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

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

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

Drop the Blockchain; It’s Cleaner

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

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

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

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

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

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

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

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

But what about…?

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

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

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

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

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

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

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

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

Conclusion: The Future of the Digital Dollar

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

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

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

Appendix A: What About Bitcoin?

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

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

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

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

Appendix B: Some Rough Scaling Math

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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