Ten31 Timestamp 837,980
The week was marked with much stronger than expected macro headlines across the board, with the latest ISM reading indicating manufacturing expansion for the first time since 2022, March Nonfarm Payrolls figures once again blowing out consensus, and the price of oil breaking $90/barrel for the first time since October. While a variety of data points under the hood suggested the health of this growth may be lacking, these updates – along with recent prints pointing to stubbornly high inflationary pressures – severely complicate the optics of the long-awaited Fed rate cuts that the market has been anticipating and seemed to take as a given just a few weeks ago. Right on cue, Jerome Powell and various Fed governors took to the financial airwaves throughout the week to jawbone down expectations for near-term easing in response to these macro updates. However, exploding federal deficits – despite unemployment <4% and the country experiencing a period of at least nominal peacetime – and a federal interest burden that appears to be going parabolic make sustained high rates on government debt (or even worse, further rate hikes floated by some Fed officials this week) seem like a virtual non-starter for the central bank, particularly given higher rates increasingly look stimulative.
This was an apt week for investors to grapple with the rock and hard place dilemma of potential fiscal dominance in the US, as Satoshi Nakamoto’s 49th birthday fell on April 5th, a date we can only assume was no accident and which harkens back to the last time the US experienced a prolonged period of fiscal dominance (though that decade was marked by both economic depression and a world war). As politicians and central bank governors confront historically high debt to GDP ratios and the undefeated opponent of compound interest, bitcoin continues to do exactly what it was designed to do and looks more compelling than ever as the network approaches its next programmatically determined block subsidy halving in just ~two weeks.
Portfolio Company Spotlight
Mempool.space is the leading explorer and analytics platform for the bitcoin ecosystem. The platform provides extensive data and tools for real-time analysis of the multi-layer bitcoin network, including granular information on the bitcoin blockchain, the lightning network, and a mining dashboard, all presented in an intuitive and sleek UI. The site’s tool suite allows users to easily estimate forecasted transaction fees, drill into in-depth data on both historical and forecasted blocks, explore the liquidity and connectivity of nodes across the lightning network, and much more. Users can either query data directly through the mempool.space site or choose to self-host an instance of the project on their own hardware to eliminate third-party dependencies. In addition, mempool.space has recently launched a Mining Accelerator product to help users more easily and predictably manage bitcoin’s volatile blockspace fee market.
Selected Portfolio News
Mutiny Wallet released a major new update that offers a robust nostr-based social payments flow similar to the familiar UX of apps like Venmo, as well as new discovery tools for Fedimint federations:
Media
Coinkite Co-Founder and CEO Rodolfo Novak, AnchorWatch Co-Founder and CEO Rob Hamilton, and Unchained VP of Custody Support Tyler Campbell joined the newest edition of ARK’s Bitcoin Brainstorm series to discuss the latest developments in bitcoin custody solutions.
Ten31 Managing Partner Marty Bent, Cathedra President Drew Armstrong, and Kungsleden Founder Tom Masiero discussed strategic and regulatory considerations for bitcoin mining on the Energizing Bitcoin podcast.
Market Updates
This week was packed with macro headlines that came in hotter than expected. The latest ISM data kicked off the week with the first print indicating US manufacturing expansion in 16 months, and ADP jobs data also came in well north of consensus.
Even more notably, Nonfarm Payrolls data for March increased by 303,000 on the month, substantially ahead of the highest analyst estimates for the third consecutive month.
However, as has become tradition in the past two years, job gains for the prior month were revised down, and all net employment gains came from part-time jobs. Meanwhile, the vast majority of job gains continue to be driven either by government or government-adjacent sectors like healthcare.
As all the macro data points came in hot, the price of crude oil – the key underlying input for a vast array of goods and services around the world – surpassed $90/barrel for the first time since October. Prices are now up ~20% YTD for both Brent and WTI.
Federal Reserve commentary – which was notably dovish at the latest FOMC meeting just a couple weeks ago – turned decidedly hawkish all week on the back of the strong prints and oil price action, as both Chairman Jerome Powell and Cleveland Fed President Loretta Mester ruled out rate cuts at the central bank’s next meeting in May.
Minneapolis Fed President Neel “Infinite Cash” Kashkari – who was vocally unconcerned with the potential for inflation throughout 2021 – indicated the central bank might not cut at all this year, while Fed Governor Michelle Bowman even suggested more hikes might be required.
With stronger headline data apparently darkening the horizon for near-term easing, benchmark interest rates pushed higher this week, with the US 10-year Treasury yield climbing ~20bps, an increasingly precarious trend as federal interest by itself has now surpassed spending on Medicaid and is set to ramp parabolically through year-end.
Against that backdrop, Bloomberg’s staff economists ran 1 million simulations that overwhelmingly showed federal debt is on an unsustainable path, adding sophisticated stochastic modeling support to a thesis that bitcoiners, Austrians, and anyone familiar with compound interest have been highlighting for decades.
The latest bank data out of the Dallas Fed pointed to softness in a variety of key areas, including overall loan demand and an uptick in non-performing commercial real estate loans.
Meanwhile, office vacancies continued to climb to another new record of nearly 20% per the latest data from Moody’s. As of this week, shares of New York Community Bancorp – the recent poster child for regional banking stress driven by commercial real estate – are now trading below the price at which a private consortium stepped in with a $1 billion rescue package last month.
With bitcoin’s next block subsidy halving just over two weeks away, spot ETF flows were largely quiet on the week, with both GBTC outflows and newcomer inflows decelerating and roughly offsetting. However, BlackRock updated its IBIT prospectus to name a variety of traditional finance bellwethers – including Citadel, Goldman Sachs, UBS, and Citi – as Authorized Participants, suggesting growing institutional comfort with and interest in bitcoin flows.
Regulatory Update
Argentina, hailed late last year as the next bastion of geopolitical support for bitcoin thanks to newly elected President Javier Milei’s outspoken criticism of central banking, created a new mandatory registry for bitcoin service providers in the country, perhaps indicative of a greater than advertised regulatory appetite within the new administration.
The Louisiana State House unanimously passed a bill explicitly protecting the right to buy, mine, and self-custody bitcoin in the state. The legislation follows similar successful efforts in Missouri and Oklahoma earlier this year, though all bills still await gubernatorial signatures.
A new proposal in Paraguay’s parliament would impose an ostensibly temporary moratorium on bitcoin mining activities in the country.
Across the world, meanwhile, Bhutan announced plans to expand its bitcoin mining operations – first publicized last year – by 500MW (vs its current capacity of 100MW) by the first half of 2025.
Access to bitcoin and bitcoin-linked products (including US-based spot bitcoin ETFs) has become a voting issue in the upcoming South Korean parliamentary elections, with representatives from multiple parties recently including bitcoin-friendly policies in their platforms.
Noteworthy
Leading ASIC manufacturer Bitmain announced the launch of its new Antminer S21 Pro model, which is set to be the most powerful and efficient machine on the market once it begins shipping later this year.
A new report this week suggested that Facebook parent company Meta gave Netflix access to users’ private messages to improve Netflix’s content recommendations.
Meta has denied the allegations, but the news comes just a week after a separate report indicating Meta used its now-defunct VPN to effectively perform man-in-the-middle attacks on Snapchat users. Both stories highlight the deficiencies of legacy social media and communications apps and the importance of both high quality privacy software and Nostr.
Travel
Austin BitDevs, April 18
Bitcoin Asia Conference, May 9-10
Bitcoin 2024, July 25-27