Ten31 Timestamp 839,027
It was an awkward week for the many pundits and economists that spent last fall hanging the “Mission Accomplished” banner in the war on inflation, as the closely-watched CPI reading for March came in above expectations and showed a clear reacceleration of annual price increases across most categories. Benchmark yields spiked higher as traders immediately kicked back expectations for any near-term rate cuts by the Fed, with the 10-year experiencing its worst day since the onset of the COVID crisis four years ago. The backdrop was not helped by a very weak 10-year auction, ongoing federal deficit spending at levels set to overshoot CBO projections by ~50% this year, and growing jitters around Middle East tensions that have pushed broad commodity prices near post-2008 highs. As markets aggressively reprice expectations for near-term changes to monetary policy set at the opaque discretion of a tiny cabal of the same pundits and economists that celebrated the death of inflation a few months ago, bitcoin just passed block 839,000, meaning the network is now less than 1,000 blocks away from the next programmatic change to its predetermined, predictable, and consensus-enforced monetary policy.
Portfolio Company Spotlight
Debifi is a non-custodial lending platform providing institutional-grade liquidity for P2P loans collateralized by bitcoin. The company, founded by Hodl Hodl CEO Max Keidun, offers robust, secure multisig vaults that ensure bitcoin collateral cannot be rehypothecated, solving one of the key problems plaguing most “DeFi” projects. Debifi extends the proven security of Hodl Hodl’s lending model to the institutional sphere and just launched its open beta.
Selected Portfolio News
Mutiny Wallet rolled out a preview of its new lightning address feature for Mutiny+ users:
Strike now has 90% banking coverage for users in the US:
Debifi launched its Android app on the Google Play store:
Unchained added new internal controls options for multi-user enterprise accounts:
Unchained also added trading desk support Hawaiian clients:
Media
Battery Finance Founder and CEO Andrew Hohns joined Ten31 Managing Partner Marty Bent on the TFTC podcast to delve into how bitcoin can radically reshape traditional financial products.
Marty also joined a Twitter Spaces with Mic Drop Markets to discuss bitcoin’s growing intersection with the energy and power sectors.
The Mutiny Wallet team joined Ten31 Managing Partner Matt Odell on the Citadel Dispatch podcast for an overview of everything they’re building.
Unchained published an overview of its approach to open source software with Senior Software Engineer Buck Perley.
Upstream Data Founder and CEO Steve Barbour joined the Blockspace mining podcast to discuss Upstream’s products, bitcoin mining’s integration into energy systems, and more.
Debifi and Hodl Hodl Founder Max Keidun appeared on the Investor’s Podcast to explore the market for bitcoin-backed lending.
GRIID CSO and Ten31 Advisor Harry Sudock and Mutiny Wallet Co-Founder Paul Miller participated in the latest episode of the Bitcoin Review podcast.
Market Updates
Recent signals of entrenched inflation were resoundingly amplified this week, as the latest CPI reading for March came in at +3.5% Y/Y, above expectations and marking a clear reacceleration of the trend.
So-called “Supercore” CPI – which excludes a variety of categories including shelter and rent costs – also spiked again to nearly +5% Y/Y, as categories like auto insurance have continued to surge. Meanwhile, commodities broadly have continued their recent run back toward post-2008 highs.
Bond yields popped on the inflation headlines, with the benchmark US 10-year Treasury yield breaking 4.5% – and nearly touching 4.6% – for the first time since last fall’s bond rout, good for the worst one-day move since March 2020.
A poorly timed 10-year Treasury auction immediately followed the CPI headline and posted the third largest tail on record as foreign participation declined to fall 2023 lows.
Odds of the first long-awaited Fed rate cut in June immediately collapsed on the news, and the Wall Street Journal’s Fed insiders suggested cuts are now more a matter of if than when.
President Biden, however, reassured voters that the completely independent Fed will indeed cut before year-end.
The action in inflation and rates – as well as rumors of escalating tensions in the Middle East on Friday – led to a selloff in equity markets in the back half of the week after months of up-only momentum, though the S&P500 continues to hover around all-time highs going into the weekend.
The one silver lining for inflation data on the week was the latest PPI print coming in notably lower than February’s very hot reading, but that data point was definitively drowned out as inflation expectations remain anchored well north of the Fed’s ostensible 2% target, a sentiment publicly echoed this week by both Jamie Dimon and Larry Fink.
In a stroke of appropriate timing, the US Treasury Department wrapped up the first half of its fiscal year and released its latest statements this week, which show a deficit of $1.1 trillion through F1H24. This figure puts the US on pace to not just blow past CBO projections released just a month ago, but also to surpass the most recently projected deficit for 2031.
Overseas, the Japanese Yen – which has been bouncing around the 150 USDJPY level for most of the year – surged to over 153 this week, definitively breaking through a critical level that many analysts expect will lead to BOJ intervention and potentially incremental headwinds to US Treasuries.
Back in the US, multiple stories popped up in the press this week about various commercial real estate “doom loops” accelerating in large markets like Boston and St. Louis.
Bitcoin continued to consolidate in the high $67,000 to $72,000 range on the week, as the orange coin sold off alongside everything else on Friday’s war jitters. Inflows to the new spot bitcoin ETFs totaled just $572 million on the week, the lowest sum since the vehicles launched.
Asset management giant and FBTC issuer Fidelity has reportedly begun proposing substantially higher fees for ETFs to be included on its platform, a signpost for spot bitcoin ETFs, which are likely to see fees head much higher after this initial honeymoon period, especially as holders accumulate significant embedded capital gains. A collaborative custody approach stands to be far more tax-efficient than an ETF while offering similar convenience and far superior security.
Bloomberg reported that new spot bitcoin ETFs filed by large Chinese asset managers Harvest and Bosera for the Hong Kong market could see approval as soon as Monday of this coming week.
Regulatory Update
The US House of Representatives passed a bill on Friday that would further cement surveillance agencies’ ability to spy on American citizens without a warrant (though lack of explicit legal authorization has not historically been a barrier to such a practice).
The SEC issued a Wells Notice – a preliminary warning indicating forthcoming legal charges – to “decentralized” exchange Uniswap, whose decentralized CEO issued a forceful response from Uniswap’s decentralized headquarters.
Noteworthy
Twitter announced that the government of Brazil has forced it to block certain accounts within the country, another stark reminder of the need for permissionless communications protocols like Nostr without a central party that can be politically pressured.
Semiconductor giant TSMC received nearly $12 billion in grants and loans for new factories in Arizona, which could potentially have positive geopolitical implications for ASIC manufacturing over time.
A small Japanese public company announced its adoption of a bitcoin treasury strategy and an initial bitcoin allocation of $6.5 million, driving an overnight doubling in the company’s stock price.
OpenSats announced a new long-term support grant for prolific Nostr developer Pablo Fernandez, who is responsible for some of the most popular and innovative applications in the Nostr ecosystem.
TD Bank – the large Canadian financial institution not exactly known for its forward-thinking approach to financial sovereignty – released a new advertisement this week for bitcoin ETFs.
Travel
Austin BitDevs, April 18
Bitcoin Asia Conference, May 9-10
Bitcoin 2024, July 25-27