Ten31 Timestamp 782,738
This week was fraught with ongoing signs of an increasingly unstable macro backdrop, including a continued spike in borrowing from the Discount Window, muddled commentary from Treasury and Fed officials, and potential indicators of further stress on the European banking system. Meanwhile, regulatory ire against the “crypto” industry escalated notably from already heightened levels, as the SEC issued a new cautionary letter to investors alongside numerous enforcement actions, including a Wells Notice to prominent exchange Coinbase. As we so often point out in the Timestamp, bitcoin continues to do exactly what it was designed to do despite all this noise – most notably, the network saw an 8% upward difficulty adjustment on Thursday as hashrate hit an all-time high of ~340 EH/s, over 2x the pre-China ban highs of spring 2021.
Selected Portfolio News
Strike added Send Globally capabilities for remittances to Vietnam:
Fold announced new updates to its rewards programs:
Statmuse surpassed 100 million searches on the platform for the first quarter of 2023:
Unchained added trading desk support for North Carolina:
Samourai Dojo v1.19.0 was released:
Start9 added a package for self-hosted streaming service Jellyfin:
Media
Strike founder and CEO Jack Mallers returned to CNBC to discuss the recent increase in bitcoin’s price and the strength of bitcoin’s decentralization.
Market Updates
The Federal Reserve hiked benchmark interest rates again this week, though by only 25bps relative to the 50bps increase expected several weeks ago. The latest Federal Funds Rate target is now just below the pre-GFC high.
Commentary from Fed officials was mixed, but seemed to indicate some dovish tweaks to the FOMC’s policy outlook on the back of recent instability in the banking system. The market is now pricing in rate cuts as soon as June.
More stress in global financial plumbing was evident this week. Borrowings by banks at the Discount Window totaled $110 billion, down notably W/W but still above the weekly highs of the 2008 panic; at the same time, use of the Fed’s new BTFP facility shot up to $54 billion.
The Federal Home Loan Bank (a GSE often referred to as the “lender of next to last resort”) raised close to $400 billion across two offerings, presumably in anticipation of accelerating liquidity needs across the banking sector.
As a result of the ongoing strain on the system, the Fed’s balance sheet grew by another $100 billion W/W. The last several weeks have now seen a reversal of ⅔ of the relatively minimal QT the Fed had previously achieved over the past year.
The US has reportedly started “studying ways” to guarantee all bank deposits regardless of size. Treasury Secretary Janet Yellen suggested this was not the case at a hearing this week, only to walk that back the following day.
On Friday, Yellen convened an unscheduled meeting of the Financial Stability Oversight Council.
European markets saw their share of turbulence as well. Deutsche Bank shares fell precipitously on Friday (though pared some losses in late-day trading) while the bank’s CDS spreads breached COVID highs on growing fears of contagion from the failure of Credit Suisse.
UK inflation unexpectedly jumped M/M for February after several months of sequential declines, and the Bank of England lifted its benchmark rate by 25bps later in the week.
Regulatory Update
The White House kicked off a regulatory salvo against the “crypto” space this week with a highly critical report of the industry that cited recent volatility, exchange and lender collapses, and potentially fraudulent activity.
The SEC, meanwhile, issued a cautionary notice to investors about the risk of investing in crypto assets, with a particular focus on the likelihood that many such instruments are not complying with securities laws.
The same day, the SEC issued a Wells notice to major exchange Coinbase regarding the company’s staking services and listing of potentially unregistered securities.
The agency also sued Tron founder Justin Sun over allegations of selling unregistered securities and engaging in market manipulation.
Finally, the SEC served a subpoena to SushiDAO and one of the project’s key contributors.
While the week was littered with more aggressive enforcement actions and overtures against “crypto” from the federal level, the last few days also saw several pro-bitcoin or anti-CBDC initiatives emerge at the state level.
Most notably, a bill co-authored by the Bitcoin Policy Institute to enshrine legal protections for bitcoin holders and miners was introduced to the Texas state legislature.
Florida Governor Ron DeSantis proposed legislation to prohibit the use of a CBDC as money in his state, while Senator Ted Cruz proposed a bill to prohibit the Fed from issuing a direct-to-consumer CBDC.
Senators Rick Scott and Elizabeth Warren introduced a bipartisan bill to create direct Congressional oversight of the Federal Reserve.
Noteworthy
Financial markets participants have started to note growing concerns about the record amount of commercial real estate debt set to mature this year, the vast majority of which is held by smaller banks.
Russian president Vladimir Putin endorsed the use of yuan for settlement between Russia and Asia, Africa, and Latin America in the interest of establishing a “multipolar world order.” This is the latest signpost in the world’s potential shift away from the petrodollar and follows just on the heels of China brokering a surprising diplomatic agreement between longtime adversaries Saudi Arabia and Iran.
Travel
Bitcoin Jawn, April 3
Nashville BitDevs and Meetup, April 11-12
Austin BitDevs, April 20
Bitcoin 2023, May 18-20
Nashville Ten31 Tribe event, June 14
Nashville Lightning Summit, July 13-14
Nice one