Ten31 Timestamp 744,667
Bitcoin, the broader “crypto” space, and traditional financial markets all saw major turmoil through the month of June and stagnate in July. The bitcoin price posted as much as a 40%+ drawdown from already depressed levels coming into June as the fallout from the Terra/Luna debacle and the blowup of DeFi “yield” vehicles led to forced selling among several high profile funds and companies, including Three Arrows Capital, Celsius, and many others. Meanwhile, Fed tightening continued to drive a deleveraging and bid for dollars in traditional financial markets, with the DXY breaking through to levels not seen since the early 2000s. Finally, July ended with an additional 0.75% Federal Funds Rate hike taking the benchmark to 2.25%-2.50%.
However, the most violent contagion was largely contained to companies and funds outside of the bitcoin realm, and this washout is the most recent abject lesson in the importance of the themes that guide Ten31’s investment philosophy, including our exclusive focus on bitcoin companies; the central importance of self-custody and minimization of counterparty risk, non-rehypothecation of customer funds, sustainable business models built for the long-term, and staying humble. Despite the near-term dislocation, many Ten31 portfolio companies should benefit from the latest wave of bitcoiners and sovereignty-minded hodlers that this period of volatility has minted.
Amid all the noise, the Ten31 team has stayed busy conducting diligence on potential investment opportunities, deploying into new investments, and looking for ways to add value to our portfolio companies; a great example of which was Matt Odell spearheading the launch of Bitcoin Park. This campus of recently renovated buildings near downtown Nashville, TN will serve as a central hub for bitcoin founders and contributors to collaborate on building critical projects for the future of sound money and personal freedom.
Ten31 had the privilege of hosting our latest Tribe event at Bitcoin Park, where we got to hear great talks on the state of the bitcoin mining industry from Drew Armstrong and the disruption of traditional payment rails by Jack Mallers. Attendees were also able to see an early demo of new features on the popular data repository Mempool from founder Wiz. The turnout was impressive, and those that made the trip to Nashville got the benefit of unique content from leading bitcoin founders and great conversations with fellow Tribe members. Thank you to all who showed up, and stay tuned for one more in-person Tribe event later this year.
Fund II New Investments
Fedi is building an app-based wallet leveraging the Fedimint protocol to provide a custody solution that aims to support mass adoption and sovereign, censorship-resistant use of bitcoin by balancing privacy and usability for less technical users. The Fedimint protocol offers the privacy of Chaumian mints alongside a “federation” approach that distributes trust across a variety of parties and eliminates single points of failure. Co-founders Obi Nwosu and Eric Sirion gave a great talk at Bitcoin 2022 that lays out Fedimint’s key principles and objectives.
Battery Capital is a credit opportunities asset management vehicle that will focus on project finance with unique dual collateralization in the form of both underlying physical assets and bitcoin. After launching, Battery will lend to traditional infrastructure ventures at competitive rates while allowing project sponsors to partially re-denominate real asset equity into bitcoin exposure. Upon maturity, borrowers repay principal and a portion of their bitcoin appreciation to Battery, giving Battery exposure to bitcoin’s upside while reducing medium-term volatility via project cash flows and collateralization of traditional physical assets.
Peach is a non-custodial P2P bitcoin marketplace offering a mobile app with intuitive user flow and minimal KYC requirements based on Swiss regulations. The app matches pseudonymous buyers and sellers based on user-selected trading criteria and a reputation algorithm, then facilitates exchanges via multi-sig escrow contracts in a simple process comparable to the UX of popular dating apps.
Selected Portfolio News
Fold rolled out instant debit funding for the Fold Card, increasing ease of spending and earning sats back for all cardholders:
Hodl Hodl will host Baltic Honeybadger 2022 in Riga, Latvia. This will be the first iteration of this bitcoin-exclusive conference since fall 2019 and will include talks from Ten31 partners Grant Gilliam, Matt Odell, and Marty Bent.
Unchained Capital began its rollout of 24/7 automated trading access to select users, with plans to expand the program over the course of this year. Unchained also enabled access for residents of Mississippi, bringing the number of US states with trading capabilities to 22.
IBEX Mercado reported the onboarding of 85 merchants to accept the Lightning Network payments through their POS systems during the Bitcoin 2022 Conference in Miami.
Hoseki began its alpha rollout for proof of assets for personal loans and announced partner integrations with Casa:
Start9 announced several new LND service packages to improve the ease of using an Embassy to run a Lightning node:
TFTC: Parker Lewis of Unchained Capital sat down with Marty Bent on TFTC to discuss June’s various waves of crypto contagion and review the outlook for bitcoin and sound business models built on bitcoin.
What Bitcoin Did: Matt Odell joined Peter McCormack’s show to discuss the importance of using bitcoin privately and associated best practices.
Matt Hill AMA: Start9 cofounder Matt Hill participated in an “Ask Me Anything” session on StackerNews to discuss the Embassy and the pathway for sovereign computing.
Closing the Loop: Bernard Parah, founder and CEO of Bitnob, joined John Vallis on the Closing the Loop podcast to discuss the growth of bitcoin and related financial services in Nigeria and Africa more broadly.
Samourai Wallet was featured in a Reason TV segment on key tools available to improve the ease and efficacy of using bitcoin privately.
As discussed above, the contagion across the broader “crypto” market has dominated headlines over the past month, with Three Arrows Capital, Celsius, Blockfi, Voyager, and many others either filing for bankruptcy or resorting to drastic measures to stay afloat.
Pressure on the bitcoin price over the last month led a variety of publicly traded miners – including Core Scientific, Argo Blockchain, and Bitfarms – to sell notable chunks of their bitcoin treasuries, generally at prices <$25,000.
The US Supreme Court ruled that the EPA does not have authority to unilaterally place national limitations on emissions from coal plants without specific Congressional authorization, an interpretation that will make federal-level mandates against bitcoin mining more difficult.
The Financial Action Task Force (FATF) is preparing to release an updated report on its “travel rule” and “unhosted wallet” recommendations to increase the friction of self-custody and private transactions.
The EU reached a provisional agreement to increase information requirements on all digital asset transactions to and from regulated service providers, though it currently excludes requirements for payments between private wallets.
The Deputy US Treasury Secretary gave a talk at Consensus 2022 highlighting that the US is also focused on stepping up regulatory efforts around “unhosted wallets.”
Fed Chairman Jerome Powell suggested a CBDC may be necessary to “help the US dollar’s international standing.”
Gazpromneft, Russia’s third-largest oil producer, announced a partnership with Swiss bitcoin mining company BitRiver to mine in remote oil fields and new sites without complete transportation infrastructure.
Jack Dorsey’s TBD – a subsidiary of Block – announced a new decentralized web initiative called Web5, whose initial focus areas will be decentralized identity and data storage.
The Intercept reported that Coinbase has been selling its Tracer service to ICE, which may provide the agency additional tools for surveilling users’ transaction history.
Power outages from a storm in Montana on June 11 knocked out 75% of Marathon Digital’s rigs for an extended period; the facility was not expected to return to full functionality until early July.
Jack Dorsey and Jay-Z announced the founding of The Bitcoin Academy in Brooklyn. The organization will offer free financial and bitcoin education to residents of Marcy Houses starting from June 22 through September 7.
NYDIG formed a strategic alliance with Deloitte to help clients integrate bitcoin products into their existing banking, consumer rewards, and employee benefits programs.