Ten31 Timestamp 796,009
History’s long list of lessons on the dangers of counterparty risk added another entry this week, as BitGo’s proposed acquisition of Prime Trust fell apart, presumably on the back of revelations that the prominent “Qualified Custodian” is facing a shortfall of customer funds. Less than a year ago, Prime Trust was a high-profile backend custody provider for a wide variety of bitcoin and “crypto” companies and had just completed a $100 million+ Series B fundraise, illustrating again (as with FTX in November 2022 or SVB in March 2023) the severe Turkey Problem posed by counterparty risk, even when your counterparty appears stable and well-capitalized. Fortunately, bitcoin was designed to address exactly this problem, and we see Prime Trust’s challenges as another validation of bitcoin’s value proposition to individual and corporate treasuries, alongside the growing ecosystem of services and tools that help scale those benefits to a larger institutional audience.
Portfolio Company Spotlight
Unchained is a bitcoin financial services platform offering a suite of products to consumers and enterprises for securing and managing bitcoin holdings through a multi-signature, collaborative custody model. Unchained’s infrastructure allows users and institutions to hold 2 of 3 keys in a multi-sig quorum, remaining in full control of their bitcoin while leveraging Unchained for backup signing and technical support if necessary. The platform eliminates the issue of counterparty risk on display with Prime Trust this week without turning users into single points of failure through key mismanagement, theft, etc. Unchained offers a variety of additional financial services on top of its custody platform, including bitcoin-backed lending, trading, IRA and inheritance products, and many more to come.
Selected Portfolio News
Coinkite published an experimental implementation of Miniscript for Coldcard:
River Financial’s lightning node surpassed 2 million transactions routed:
Mutiny Wallet announced an extensive set of new updates:
Start9 rolled out a package for SimpleX Server, an app focused on decentralized, private messaging:
Impervious announced Imp Chat, a new mobile application for private messaging:
Media
Ten31 Managing Partner Grant Gilliam published a piece delving into the BlackRock spot bitcoin ETF filing and its potential implications for bitcoin infrastructure.
In the wake of this week’s headlines surrounding Prime Trust, Strike and Fold both published updates confirming lack of exposure to Prime Trust and the security of customer balances.
Fedi Co-Founder and CEO Obi Nwosu joined the Swan Signal podcast to discuss Fedi’s long term ambitions and recent changes in the regulatory landscape.
Market Updates
Prominent custodian BitGo canceled its proposed acquisition of embattled peer Prime Trust just a few weeks after announcing the transaction.
Shortly thereafter, Prime Trust suspended withdrawals, and a Nevada state regulator ordered Prime Trust to cease all activities, noting the company faces a “shortfall of customer funds.”
The US national debt broke the $32 trillion mark for the first time this week. The balance is up more than $700 billion in the couple weeks since the debt ceiling was suspended.
Federal Reserve Chairman Jay Powell signaled an expectation for continued rate hikes later this year during Congressional testimony on Wednesday.
UK gilts continued their weeks-long selloff, with yields reaching highs not seen since last fall’s “mini-budget” crisis. The Bank of England piled on additional pressure late in the week with a surprise 50bps rate hike.
Manufacturing PMI for the Eurozone came in below expectations at 43.6 (with <50 indicating contraction), the lowest level since May 2020.
In the wake of BlackRock’s spot bitcoin ETF filing, an array of asset managers – including Invesco, WisdomTree, Valkyrie, and Bitwise – filed (or re-filed) for their own spot products.
EDX Markets, a new cryptocurrency exchange backed by traditional finance behemoths Citadel, Fidelity, and Charles Schwab, began operating this week after first unveiling plans to launch late last year.
Regulatory Update
The International Monetary Fund (IMF) confirmed it is working on a global platform for CBDCs, with the goal of increasing “interoperability” between national CBDCs.
Noteworthy
Binance began rolling out lightning nodes as part of its upcoming lightning network integration for users (previously announced in early May).
The Wall Street Journal highlighted the ongoing depression in occupancy of commercial real estate in the downtown neighborhoods of most major metro areas, one of many negative signals for the commercial real estate sector.
Travel
Nashville Bit Devs, July 11
Nashville Lightning Summit, July 13-14
Austin BitDevs, July 20
BitBlockBoom 2023, August 24-27