Ten31 Timestamp 840,068
The bitcoin network completed its latest block subsidy halving on Friday night, the fourth such programmatic reduction of the pace of bitcoin issuance since the protocol’s launch in early 2009. While the subsidy of newly minted bitcoin has declined by 50% relative to the past four years (officially dropping bitcoin’s supply inflation rate below that of gold), total block rewards for the first ~12 hours of this new epoch have more than compensated for the reduction, as the halving block itself drove nearly 40 bitcoin in fees and most subsequent blocks have averaged 10-25 bitcoin (equivalent to the block subsidies in various prior epochs). We expect the particular frenzy pushing fees to these levels to die down in the relatively near term, but this episode is the latest indication that concerns about bitcoin’s long-term “security budget” are misplaced. As bitcoin continues to draw in more attention, capital, transaction activity, and development mindshare across industries, we expect the network’s growing economic density (driven by many different types of transactors and use cases) to gradually and durably push on-chain fees to levels similar to what the network has experienced since the fifth epoch began. Headlines outside the bitcoin sphere this week only serve to further increase our conviction in this view, as ongoing geopolitical turmoil, an increasingly wobbly sovereign debt backdrop, and a potential return to “higher for longer” central bank policy all threaten legacy assumptions around asset allocation and drive more long-term tailwinds for adoption of the apex predator of money.
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, a capability that will become increasingly important as transaction fees push higher.
Selected Portfolio News
Unchained published a new 62-page handbook for bitcoin IRAs:
Zaprite added several new features for checkout flows and address management:
Media
Ten31 Managing Partner Matt Odell was a featured panelist on Bitcoin Magazine’s halving livestream on Friday evening.
Foundry Digital’s Head of Mining called out mempool.space as the “go to block explorer.”
Fold Founder and CEO Will Reeves was featured in an interview on fintech innovation with Visa.
Unchained’s Joe Burnett published “Your Wealth Is Melting,” an extensive new report on bitcoin’s superior properties as a savings vehicle.
Market Updates
The bitcoin network underwent its fourth block subsidy halving on Friday evening at block height 840,000 (~8pm EDT). Despite the latest programmatic 50% cut to the subsidy, hashprice (the expected daily value of 1TH/s) quickly ran back to nearly YTD highs on the latest Ordinals-adjacent speculation, with blocks in many cases containing 20+ bitcoin in total fees.
Traditional markets had their worst week in months following geopolitical turmoil in the Middle East over the weekend and growing jitters about resurging inflation. The S&P 500 and Nasdaq declined every day this week – including a 10% shellacking for $2 trillion powerhouse Nvidia on Friday – as the benchmark US 10-year Treasury yield spiked 15bps and broke 4.6% for the first time since last fall’s bond rout.
Continuing the streak of hotter than expected inflation and growth prints that has complicated the path to central bank easing, retail sales for March were up 0.7% M/M, well above consensus.
Fed Chairman Jerome Powell responded to these recent data points by indicating they show a lack of progress on inflation and that the Fed is prepared to “maintain the current level of restriction” as long as needed.
Thanks to this apparent reacceleration of inflation, traders are increasingly pricing in the potential for no rate cuts at all this year, just a few months after market consensus decisively pointed to at least three cuts in 2024. New York Fed President John Williams even suggested more rate hikes are not off the table depending on how macro trends develop.
Despite rapidly rising consternation around the near-term path of rates and parabolic expansion of federal debt, the latest auction of 20-year US Treasuries this week was solid, a reversal from the much worse 10-year auction last week.
March saw 625 commercial real estate foreclosures in the US, an increase of 117% Y/Y and ~75% off pre-COVID levels, with California, New York, Florida, and Texas all recording notable jumps.
Meanwhile, both Bank of America and M&T Bank both pointed to ongoing commercial real estate trouble on their Q1 earnings calls this week, a tough backdrop that could be compounded by a return to a “higher for longer” rates regime.
On the residential side, US housing starts were down significantly in March (following another sharp decline in January but a spike last month), with the metric recording its worst level since March 2020. Total new single family and multi-family permits are now below pre-COVID levels.
Elsewhere in residential real estate, the CEO of consumer real estate app Redfin suggested housing is “in a recession” and experiencing the worst environment that he’s seen in 20 years.
Overseas, the closely watched USDJPY exchange rate held at ~34 year high of >154 throughout the week, prompting more analyst speculation about a potential near-term BOJ intervention to defend the currency.
Hong Kong approved its first spot bitcoin ETFs, though most reports indicate the vehicles will not be easily accessible to mainland China investors, and Bloomberg’s ETF analysts expect flows to be minor in the near term.
Regulatory Update
The government of Paraguay is reportedly reconsidering its restrictive stance on bitcoin mining, with legislators now set to debate integrating miners into its hydropower capacity following a proposed moratorium on mining just a few weeks ago.
Sweden, meanwhile, abolished tax incentives for bitcoin miners that will substantially increase the cost to operate, likely curbing ~150MW of mining capacity in the country.
Noteworthy
Pseudonymous bitcoin developer and data analyst 0xB10C published new research indicating AntPool appears to be acting as a “pool of pools” for a variety of smaller mining pools, a potential vector for increased mining centralization.
Elon Musk suggested this week that Twitter might begin charging all new users a “small fee” before they can post, like, or reply. The measure would ostensibly be intended to curb the growth of bot accounts on the site, though there may be additional, more invasive motives at play.
The IMF published a new paper on bitcoin’s growing role in cross-border payment flows.
OpenSats announced two new long-term support grants for nostr-focused developers Stuart Bowman and Hzrd149.
Travel
Austin BitDevs, May 16
Bitcoin Asia Conference, May 9-10
Bitcoin 2024, July 25-27
BitcoinMENA, Dec 9-10
Thank you as always for the read.