Ten31 Timestamp 828,744
It was a busy few days for major macro indicators, but the latest overreach out of Washington stole the show this week for anyone paying attention to bitcoin. The Department of Energy released a new, ostensibly mandatory survey demanding granular, invasive data from a variety of mining operations around the US. The survey – which aims to collect information not required of virtually any other industry or power consumer – appears to lay the groundwork for expanded, unconstitutional bureaucratic surveillance of the US’s burgeoning mining industry, and potentially for even more sinister outcomes longer term. While the ongoing convergence of bitcoin mining with local grid infrastructure and the growing use of bitcoin mining as a means of methane capture from this country’s massive set of abandoned oil wells – all of which is being vigorously promoted by the local regulators and energy executives where this activity is ramping up – will serve as a bulwark against excessive federal discrimination against the mining industry, this new surveillance attempt bears monitoring, and we expect substantial opposition from stakeholders across the industry over the coming weeks. Meanwhile, bitcoin network hashrate and difficulty hit yet another all-time high.
As the US administrative state busied itself with the phantom “emergency” of computers performing hash functions with legally purchased electricity, potential signs of a more legitimate emergency appeared within the US banking system, as New York Community Bancorp (NYCB), the bank that absorbed the majority of Signature Bank’s balance sheet in the wake of last spring’s banking crisis, announced dismal Q4 results that pointed to substantial challenges in the bank’s commercial real estate loan portfolio, driving the bank’s stock down nearly 50%. This is a key trend we have been monitoring in the Timestamp for the better part of a year given skyrocketing vacancies, write downs on blue chip assets, and a wall of near-term maturities. With the Fed’s BTFP facility allegedly set to expire in March and many regional bank balance sheets still upside down, we continue to be cautious on the outlook for the legacy financial system and expect this instability to act as yet another lever to drive awareness and adoption of bitcoin’s value as absolutely scarce, counterparty-free money – or as the world’s largest asset manager would have it, the “flight to quality” trade.
Portfolio Company Spotlight
Giga Energy is a bitcoin miner and infrastructure provider focusing on stranded energy and waste gas opportunities. The company helps oil and gas producers use bitcoin mining to optimize production and monetize gas resources that would otherwise be wasted, through both proprietary mining deployments and the provision and operation of tailored power generation equipment including generators, data centers, and electrical infrastructure. Giga sits at the forefront of the convergence of the energy production and bitcoin mining industries, a trend we expect to gain significant momentum over the coming decade.
Selected Portfolio News
After completing its IPO on the Cboe Canada early this year, GRIID began trading in the US on the Nasdaq this week, a major milestone for any bitcoin-focused investment fund portfolio company:
Veteran bitcoin developer James Hilliard joined Upstream Data as CTO:
Zaprite introduced new analytics features to its dashboard:
Unchained added new historical trade data capabilities to its user portal:
Start9 launched a new package for Nostr Wallet Connect integrations:
Alongside the announcement of GRIID’s public listing on the Nasdaq Ten31 announced the launch of two new funds.
Strike CEO Jack Mallers and Chief of Staff Dylan Lieteau published the first edition of the Mailbag Mondays podcast, which will tackle a variety of questions submitted by Strike users.
Hoseki CEO Sam Abbassi and CRO Xander Carpousis joined the What Bitcoin Did podcast to discuss the importance of Proof of Reserves mechanisms for newly approved bitcoin ETFs.
Standard Bitcoin Co-Founder and CEO Tom Masiero appeared on the Blockspace mining podcast to delve into the pros and cons of bitcoin mining activity in Texas.
In a week packed with updates on many closely watched data series, the focal point was the Fed’s latest FOMC update, where the central bank held benchmark rates steady – despite the caterwauling of certain politicians – and indicated it is not yet ready to begin rate cuts, despite much recent speculation to the contrary that helped buoy stock indices to new all-time highs.
The S&P and Nasdaq declined briefly on the news, but went on to close the week at new highs, even as bond yields bounced substantially, including moves as high as +20bps for the 10-year.
Alongside the Fed continuing to waffle on the path for interest rates, the week also saw a wave of headlines pointing to mass layoffs at many blue chip companies, including UPS, Microsoft, and PayPal.
On the flipside, JOLTS data for December edged up M/M and came in above expectations, generally taken as a positive sign for the labor market.
Even more notably, January data for nonfarm payrolls showed new jobs printing almost 2x higher than consensus and up slightly on the month. However, these data increasingly come with important qualifications, including declining average hours worked and job growth driven almost entirely by part time work.
Just a week after the Fed’s confirmation that the BTFP program would indeed be ending as scheduled in early March, the global banking system showed some signs of renewed stress, as New York Community Bancorp – which took on most of Signature Bank’s assets following last spring’s banking crisis – posted Q4 results dramatically below expectations and warned of heightened loan losses, particularly in its commercial property loan book.
NYCB stock was down as much as 50% following the announcement before recovering slightly to end the week. Similar headlines also emerged in international markets, as shares of Tokyo’s Aozora Bank plunged 30% on similar commercial real estate challenges, and Swiss bank Julius Bear announced substantial write-downs on its credit portfolio.
Notably and on a surely unrelated note, the latest Fed commentary accompanying this week’s FOMC announcement removed a line claiming that “the US banking system is sound and resilient.”
Elsewhere in the highly challenged commercial real estate space, Evergrande – the massive Chinese property developer teetering on the brink of dissolution for several years – was finally ordered to liquidate by a local court this week. The Chinese government responded with additional stimulus efforts for the property sector, just one week after unveiling a broader stimulus plan that has generally failed to support slumping local stock indices.
The US Department of Energy unveiled a new initiative to collect data from dozens of bitcoin mining operations in the US, ostensibly in response to the “emergency” of growing bitcoin mining activity around the country. The survey will require respondents to provide highly granular data on their operations not required of virtually any other industry or power consumer, including specific detail on machine fleets, electricity use, and power agreements.
In a more encouraging regulatory update, US Senator Ron Wyden penned a letter calling on the NSA and other intelligence agencies to purge all data acquired through illegal data sales.
Beginning this week, Google officially updated its advertising policies to allow for “cryptocurrency trusts” (such as the many spot bitcoin ETFs that just won SEC approval) to promote their products in search results.
Anthropic, the artificial intelligence giant behind the Claude virtual assistant, confirmed it had suffered a leak of “non-sensitive” customer data this week, an incident we expect to become much more common and which highlights one of the benefits of self-hosted AI tools like the ones available on Start9’s personal servers.