Ten31 Timestamp 829,843
The week was filled with noteworthy comments from the leading masters of the financial universe, as both Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen called out the unsustainability of the US’s current fiscal path and their concerns with the swiftly deteriorating commercial real estate backdrop that appears to be a growing source of stress for bank balance sheets. Both officials assured the public that any impact from losses in this lending segment would likely be contained, though Powell took the Ivan Drago stance in his highly-anticipated 60 Minutes interview, noting that some banks would probably end up failing on the back of this trend. Despite these foreboding comments, as well as the Fed Chairman’s suggestion that the Fed would likely move more slowly than hoped on rate cuts this year, investors still found reasons to be bullish as the S&P500 ran to yet another new all-time high and exceed the 5,000 level for the first time.
As central planners grew more concerned and the market partied like it was 1999, bitcoin took a 10% leg up on the week, closing in on new multi-year highs as ETF inflows remained strong and GBTC outflows appear to have abated for the time being. With the traditional financial system looking more precarious by the week, the halving approaching, institutional interest clearly growing, and ecosystem development moving faster than ever, we continue to think the 12-24 month outlook for bitcoin and the companies building on it is as bullish as it’s ever been.
Portfolio Company Spotlight
Primal is a first of its kind application for the Nostr protocol that combines a client, caching service, analytics tools, and more to address several unmet needs in the nascent Nostr ecosystem. Through the combination of its sleek client application and its caching service, Primal seeks to offer an end-user experience as smooth and easy as that of legacy social media platforms like Twitter (and eventually many other types of applications as well), unlocking the vast potential of Nostr for the next billion people. Primal also recently launched an integrated wallet (powered by Strike BLACK) that substantially reduces onboarding and UX frictions for both Nostr and the lightning network.
Selected Portfolio News
Fold rolled out a new “push to card” feature allowing users to spend a bitcoin balance on dollar-denominated purchases directly from the app:
GRIID announced a 60 MW capacity expansion at a site in Jackson, TN:
Unchained added trading desk capabilities for clients in Nevada:
Coinkite released a new teaser video for its upcoming Coldcard Q device:
Ten31 Co-Founder and Managing Partner Jonathan Kirkwood published a new piece delving into the contrarian viewpoints underpinning Ten31’s investment thesis and process.
Ten31 Managing Partner Marty Bent delivered a presentation on navigating USD inflation alongside bitcoin’s price volatility.
Ten31 Advisor and Zaprite Head of Business Development Parker Lewis gave a talk at the same event on bitcoin as the long-term solution to monetary debasement.
GRIID CSO and Ten31 Advisor Harry Sudock joined the What Bitcoin Did podcast, the TFTC podcast, and Yahoo’s Trade Talks to discuss GRIID’s public listing debut, the outlook for bitcoin mining, and much more.
Satoshi Energy Co-Founder and CEO Andrew Myers joined the Bitcoin Frontier podcast to discuss the growing intersection between bitcoin mining and energy infrastructure.
Fed Chairman Jerome Powell kicked off the week with a 60 Minutes interview on Sunday night where he noted the central bank is likely to move more slowly than the market expects on rate cuts. Powell also channeled his inner deficit hawk, reiterating his previous comments that the pace of increase in the US national debt is unsustainable.
Investors panicked for the first 15 minutes of trading on Monday before sending stock indices to yet more new all-time highs, with the S&P500 surpassing 5,000 for the first time.
In the same interview, the Fed Chairman noted that while he does not expect the growing headwinds in commercial real estate will cause a banking crisis, he expects some smaller banks will go under.
Treasury Secretary Janet Yellen echoed that sentiment as part of Congressional testimony this week, where she suggested she’s “concerned” about the commercial real estate backdrop but that its impact will be “likely contained.”
Meanwhile, embattled lender New York Community Bancorp, potentially a near-term litmus test for Yellen’s optimistic viewpoint, saw its credit downgraded to junk status by Moody’s this week on concerns around the bank’s commercial real estate portfolio. NYCB stock, which was down ~45% last week, took another ~30% hit this week before partially paring losses on Friday.
The latest data for the services sector came in hotter than expected this week, in line with last week’s jobs report showing outsized growth in that area. Perhaps the most notable data point out of the report was that reported prices paid ticked up dramatically, potentially a sign of entrenched price inflation pressures that could complicate the Fed’s path to easing.
In contrast to strong services data, the consumer credit backdrop continued to worsen, with the latest data pointing to new post-GFC highs in delinquencies among borrowers under 40.
Overseas, Chinese stock indices continued to get hammered to start the week, despite several rounds of stimulus over the past month. Markets bounced later in the week on new short sale bans and outright forced holding as the country heads into a weeklong break for the lunar new year holiday.
Bitcoin’s price touched $48,000 once again this week, good for a ~25% bounce off post-ETF lows. The asset’s market cap is hovering around $1 trillion for the first time since 2021, and bitcoin is now closing in on multi-year highs as GBTC outflows appear to have substantially decelerated.
Outspoken pro-bitcoin politician Nayib Bukele was re-elected President of El Salvador by landslide margins.
A new report suggested Iran has used multiple major financial institutions to evade Western sanctions, the latest example of both the questionable efficacy of such sanctions and legacy financial rails being used to facilitate ostensibly outlawed activity (despite politicians’ constant hand-wringing about bitcoin’s comparatively minimal use in criminal activity).
A service called OnlyFake made waves this week with its ability to generate fake IDs capable of passing KYC/AML checks for as little as $15, yet another challenge to the legitimacy of the KYC requirements that have come to dominate financial services since the inception of the Bank Secrecy Act.
OpenSats announced a new long-term support grant to 0xB10C, a pseudonymous developer building analytics tools for the bitcoin network.