Ten31 Timestamp 830,861

The broad-based bullishness of the past few months flatlined somewhat this week as multiple inflation prints came in hotter than expected while closely watched indicators like US retail sales also moved in the wrong direction. The benchmark US 10-year yield popped notably on the week and is now up ~50bps off YTD lows to ~4.3%, a level that has historically coincided with increased stress in financial markets including September 2022’s near-implosion of British pension funds, spring 2023’s banking crisis, and last October’s turbulence in the global bond complex. While the S&P and Nasdaq were down modestly on the week as investors digested a potentially longer path to central bank rate cuts, bitcoin ripped off another ~10% move up as net inflows to new spot ETFs accelerated to the tune of ~$2.5 billion. As price inflation proves stickier than hoped (even as measured by questionable official statistics), major pockets of traditional investment like commercial real estate continue to look more impaired, and central bankers worldwide say the quiet part out loud with growing frequency, we wouldn’t bet on this strong trend for interest in bitcoin reversing in the near term. 

Portfolio Company Spotlight

Zaprite is a bitcoin-native invoicing platform providing sleek, non-custodial solutions for checkouts and payments flows denominated in both bitcoin and fiat. Zaprite’s software tools allow for seamless payments experiences for end users while providing critical reporting and accounting infrastructure to merchants using the platform. The company currently offers integrations with Strike, Unchained, IBEX, and more, as well as popular fiat-native payment options including Stripe, Apple Pay, Google Pay, and Cash App. 

Selected Portfolio News

Unchained announced a partnership with Bitcoin Magazine to become the publication’s official collaborative custody and IRA partner:

Strike announced it would eliminate spreads on bitcoin trading and introduced more transparent, volume-based fee tiers:

Zaprite announced a new integration with Square merchant terminals, which enables Apple Pay and Google Pay side by side with bitcoin and lightning payment options:

Media

Ten31 Co-Founder and Managing Partner Jonathan Kirkwood joined Unchained VP of Enterprise Sales Trey Sellers to discuss Ten31’s investment thesis, the bullish backdrop for bitcoin, and more. 

Market Updates

After several months of up-only price action across many asset classes, the market’s euphoria was disrupted this week by the latest CPI reading, which came in ahead of expectations for January at +0.3% M/M and +3.1% Y/Y, still stubbornly above the Fed’s ostensible long-term target of 2%. 

Notably, weekly earnings growth once again fell behind the pace of CPI growth after a brief window of recovery for inflation-adjusted earnings late last year. 

The latest Producer Price Index (PPI) report this week reflected a similar trend, as wholesale prices for January also climbed more than expected. 

Consumer spending data joined in the chorus of disappointing headlines late in the week, with US retail sales declining 0.8% M/M, well below consensus expectations and marking the sharpest decline since March 2023. Better than expected results for December were also revised down. 

Meanwhile, the slow motion meltdown of global commercial real estate continued this week, with Bloomberg reporting on the start of a wave of office building sales at 50%+ discounts in major US cities, which could have significant implications for regional banks around the country.  

Amid the decidedly mixed macro headlines, Bloomberg’s US Financial Conditions Index – which measures the relative stress across US credit and equity markets – pushed to its highest (i.e. least stressed) level since the Fed began hiking rates two years ago, complicating the backdrop for near-term monetary easing by the central bank. 

Bitcoin cleared the $50,000 level for the first time since December 2021 this week, while making new all-time highs against various worldwide currencies including the Japanese Yen. Spot bitcoin ETF inflows ticked up substantially throughout the week, with cumulative net flows since the products’ inception approaching $5 billion. 

Regulatory Update

Various banking lobby groups – including the Bank Policy Institute, helmed by some of the most powerful figures in the industry – sent a letter to the SEC this week seeking regulatory changes that would allow banks to more easily custody bitcoin and certain other digital assets, potentially an indication of growing corporate appetite for bitcoin exposure after traditional banks were largely excluded from participating in spot bitcoin ETFs. 

The US Treasury’s Undersecretary for Terrorism and Financial Intelligence testified to Congress this week that last fall’s Wall Street Journal report on terrorist groups relying on bitcoin for financing – the impetus for new regulatory overtures against bitcoin despite being debunked almost as soon as it was published – was inaccurate and that “terrorists still prefer to use traditional products and services.” 

The Missouri House of Representatives passed a bill that would explicitly protect the right to buy, mine, and self-custody bitcoin. 

Ethiopia’s sovereign wealth fund signed a $250 million MOU with a Hong Kong-based group to develop new bitcoin mining and high-performance computing operations in the country. 

Noteworthy

Founders Fund, the venture capital bellwether founded by Peter Thiel, reportedly purchased $100 million of bitcoin for its balance sheet last summer with prices below $30,000, a decision we expect will be replicated by forward-thinking investors and companies at an accelerating pace this decade. 

Lightning developer Lisa Neigut’s proposal for dual-funded lightning channels – which seek to improve lightning’s UX by enabling balanced liquidity when a channel is opened – was officially merged into the lightning network specification this week. 

The European Court of Human Rights struck down laws requiring encryption backdoors and extensive data collection on digital communications, a blow to proposed legislation like the EU’s Chat Control or the UK’s so-called Online Safety Act. 

Travel

• Nashville BitDevs, February 20-21

• Ten31 Tribe Event & Bitcoin Takeover (Austin, TX), March 14-15

• Bitcoin Asia Conference, May 9-10

• Bitcoin 2024, July 25-27