Ten31 Timestamp 797,030

Jul 03, 2023

The Prime Trust story got even murkier this week, with Nevada regulators alleging that the custodian had lost access to wallets controlling customer funds as far back as December 2021, highlighting again the vulnerabilities introduced by trusted third parties. Elsewhere this week, two more well-known trusted third parties – Fidelity and ARK – re-filed their spot bitcoin ETFs, with amended language to better match BlackRock’s submission from several weeks ago. The SEC seemed to throw cold water on all these applications at the end of the week with several new objections, though a handful of major institutions including Fidelity, Invesco, and VanEck immediately re-filed their applications again to address the agency’s latest concerns, suggesting that the apparently significant institutional appetite for a vehicle like this isn’t going away anytime soon.

Portfolio Company Spotlight

GRIID is a bitcoin mining company pursuing a differentiated strategy of vertical integration to secure low-cost power and enhanced control over its operations. Founded in 2018, GRIID currently operates across four active sites in the US, with a substantial pipeline of additional buildouts to take place in the near term. GRIID seeks to directly negotiate power contracts as close as possible to the source of generation, with a primary focus on nuclear and hydroelectric power assets. GRIID’s strategy drives both highly competitive power costs and greater control over site build outs and daily operations, all of which are critical to long-term success in bitcoin mining.

Selected Portfolio News

Bitcoin Keeper announced a beta release of its new Android app, which will implement Samourai Wallet’s Whirlpool for Coinjoins:

Fedi and Stakwork announced a hackathon focused on applying generative AI to bitcoin and lightning:

River launched a new lightning dashboard for enterprises using River Lightning Services:

Media

Matt Odell joined the Coin Stories podcast with Natalie Brunnell to discuss bitcoin privacy and online censorship resistance.

Harry Sudock of GRIID and Matt Lohstroh of Giga Energy took part in Anthony Pompliano’s “Bitcoin Mining Masterclass.”

StatMuse released its latest monthly Muse Letter, recapping highlights from the month, including the platform recording more searches in the first half of 2023 than in the prior two years combined.

Zaprite’s platform was profiled in an article in Bitcoin News.

Cathedra was featured in a piece at Hashrate Index discussing bitcoin mining ASIC optimization.

Market Updates

The saga surrounding troubled custodian Prime Trust intensified this week, as Nevada regulators sought to put the company into receivership, noting that Prime Trust owes clients more than $85 million in fiat currency but has only $3 million on hand.

Regulators allege that Prime Trust lost access to some “legacy wallets” in late 2021 and had been bridging withdrawal requests from those wallets with customer funds from elsewhere in the business.

Following BlackRock’s spot bitcoin ETF filing from several weeks ago, asset management giant Fidelity and tech-focused ARK both re-filed for their own spot ETFs.

However, the SEC indicated on Friday that all recent spot bitcoin ETF filings are currently insufficiently “clear and comprehensive.”

Later that same day, Fidelity, Invesco, VanEck, and several others once again re-submitted their filings to address the SEC’s concerns. It remains to be seen how much of an impediment the SEC’s response will be for institutions with outstanding filings.

On the macro front, US weekly bankruptcy filings spiked back toward March 2020 levels. At the same time, however, official figures for Q1 GDP growth were revised up substantially, and Bloomberg’s economic data “surprise index” reached multi-year highs.

Fed Chairman Jerome Powell noted at a conference that Fed policy “may not be restrictive enough.” A few days after these comments, core PCE – the Fed’s preferred inflation measure – increased 0.3% M/M and 4.6% Y/Y, slightly below expectations.

Against that backdrop, the US M2 money supply actually increased in May for the first time in 9 months.

Reports this week indicated that the German central bank may require a recapitalization to cover losses on its government bond portfolio (though the bank subsequently denied the report).

Regulatory Update

The EU published its legislative framework for establishing a digital euro, following a leak of a draft version of the bill two weeks ago.

Slovakia lowered its capital gains tax on bitcoin transactions from 39% to 7%, with the caveat that the bitcoin must have been held for at least one year. Additionally, payments of less than €2,400 will be exempt from taxation.

Noteworthy

Popular Nostr client Damus was threatened again with removal from the iOS App Store despite making changes requested by Apple. A new version that further dilutes the UX of sending “zaps” was released later in the week.

Developer Dan Gould released Payjoin Dev Kit (PDK), which aims to give developers new tools to more easily integrate Payjoin functionality into applications.

Bitmain announced the launch of the S19j XP. Elsewhere, large public miner Riot Platforms signed an agreement with MicroBT to purchase over 30,000 Whatsminers that will be produced in the US.

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