Ten31 Timestamp 764,774
"If you wait by the river long enough, the bodies of your enemies will float by." Sun Tzu
The collapse of crypto exchanges and businesses FTX/Alameda, Celsius, Blockfi and potentially Genesis Global Capital have caused havoc with tens of billions of dollars lost to vaporware in what may turn out to be the largest fraud in modern history. These exchanges and businesses were fueled by the hubris of the who’s who of venture investing spurred on by cheap money and credit sloshing through the financial system seeking gains from the ever more risky endeavors advertising unrealistic returns. As information continues to trickle out from these events it is becoming evident there was a complete disregard for understanding business models, reviewing financial records, evaluating technology and basic diligence on the companies the investors were backing. Instead, these investors hopped aboard the marketing machine of sports stars, comedians, “effective altruists”, politicians and anyone else who would sell themselves for an endorsement of ventures that have left nothing behind but criminal probes, civil actions, and bankruptcies.
What can be distinctively drawn from these failures is that bitcoin is the SIGNAL. Bitcoin is the only institutional grade asset, and the infrastructure being built around bitcoin is real. Unlike the bucket shops and pump and dump schemes of “crypto,” bitcoin businesses grounded in developing products and services for retail and institutions have actual customers. While crypto’s unsustainable businesses were failing and their clients left with nothing, many of our companies were having a record month with new signups, bitcoin sales, and purchases of sovereign bitcoin tools and services. The performance of our companies in the last month demonstrates in real-time Ten31’s thesis of investing exclusively in the technology and infrastructure supporting the bitcoin ecosystem.
The latest Ten31 Tribe event was held on Nov. 17th at Bitcoin Commons. We had as our guest speakers Andrew Hohns of Battery Finance and Tom Masiero of Standard Bitcoin. Andrew provided a detailed background on in the process of providing an institutional grade credit product utilizing the inherent properties of bitcoin. Tom’s discussion provided a bitcoin mining story arc from mining deals in 2017 to building out commercial data centers in 2022. Both guests fielded questions from the Tribe on building bitcoin businesses, personal insights, and how early we are to the global bitcoin market.
The next in person Ten31 Tribe events have been scheduled for March 16, 2023 in Austin and June 14th, 2023 in Nashville. The Austin Tribe event will happen during SXSW, and the Nashville event will coincide with “Building in Bitcoin'' at Bitcoin Park. We will have more information to provide in the coming months for these two events.
Selected Portfolio News
Amidst the turmoil of the last few weeks, River Financial noted they’ve had their best month YTD so far in November.
In the wake of the recent wave of exchange and custodian insolvencies, Hoseki launched a user-friendly page for individuals and institutions to make public, real-time Proof of Reserves attestations to selectively prove bitcoin ownership.
Unchained announced a headcount reduction in response to headwinds from the bitcoin bear market. Additionally, Parker Lewis, Head of Business Development, announced a transition to Unchained’s Board of Directors. The recent fallout from fractionally reserved institutions has strongly validated Unchained’s collaborative custody model and has driven significant inflows to the platform so far this month. Texas hedged:
Strike reduced its minimum bitcoin purchase levels to only $0.01:
The latest version of Samourai Dojo, including several UX improvements, was released last week:
Marty Bent joined Glenn Beck and Barstool to parse through the fallout of the FTX collapse and highlight the distinction between bitcoin and “crypto.” Marty was also cited in a Fox Business article about FTX’s numerous red flags.
Jack Mallers, CEO and founder of Strike, returned to CNBC to highlight a similar theme of bitcoin’s differentiation and resiliency.
Sam Abbassi, CEO and founder of Hoseki, joined Matt Odell and the Bitcoin Policy Institute to discuss the potential for Proof of Reserves.
Parker Lewis of Unchained and Ten31 sat down with Marty on TFTC to discuss his transition to Unchained’s Board and the strength of collaborative custody.
River Financial hosted a Twitter Spaces with Pierre Rochard, Michael Goldstein, and Dylan Leclair to discuss the power of bitcoin’s freedom from counterparties.
Several days after its withdrawal suspension, Genesis reportedly warned some investors that it may be facing bankruptcy without additional emergency funding.
The GBTC discount continued widening to a record low, partially driven by fears that Genesis’s struggles may have implications for Grayscale, as both are owned by parent company Digital Currency Group (DCG).
Blockchain surveillance firm Chainalysis announced it is a creditor to FTX, raising further questions about the service’s apparent lack of ability or willingness to raise alarms about FTX’s problematic fund flows.
Amid the contagion, bitcoin mining difficulty continued its upward march, reaching an all-time high in this week’s difficulty adjustment. Meanwhile, bitcoin holders appeared to withdraw funds to self-custody at a historic rate over the first few weeks of November.
Inflation in the UK accelerated to a 41-year high of 11.1% Y/Y, including food price increases of over 16%, even as the BOE noted the country probably entered a recession in the third quarter. The government also imposed a price cap on energy, likely signaling shortages to come in the winter months.
The New York Fed and several large banks began a pilot program for a digital dollar for settlement between institutions, potentially helping pave the way for a wholesale CBDC.
Tom Emmer, one of the more vocal bitcoin supporters in Congress, won the role of House majority Whip following the 2022 midterm elections.
New York Governor Kathy Hochul signed into law a two-year moratorium (previously passed in June by the state senate) on new or renewed permits for Proof of Work mining operations in the state.
Brazilian authorities reportedly froze bank accounts of at least 43 people and companies participating in widespread protests against the results of the country’s latest presidential election, once again highlighting the vulnerabilities of permissioned payment systems.
The latest version of Bitcoin Core (v24) was released. This iteration adds a new configuration option for full replace-by-fee (RBF) logic to make nodes accept the higher-fee version of conflicting unconfirmed transactions, replacing the prior “first-seen” heuristic.
The Bitcoin Policy Institute released an article addressing the potential for Proof of Reserves to mitigate some custodial counterparty risk.
Blockstream launched “BOL2” (Build on Layer 2), an initiative aimed at connecting peers building on bitcoin second-layer solutions such as Lightning and Liquid.
Bitcoin and rates analyst Nik Bhatia published an essay on the fundamental flaws of non-bitcoin “DeFi.”
The US personal savings rate reached lows not seen since 2008.