Ten31 Timestamp 857,209

Aug 17, 2024

Investors successfully memory-holed last week’s massive unwind that had economists calling for emergency rate cuts, with equity indices pushing back toward recent all-time highs and market bellwether NVDA closing the week well north of its pre-selloff level. Macro data generally looked more favorable this week, including an unsurprising headline inflation update that likely keeps the Federal Reserve on track for long-awaited rate cuts next month, even as the underlying inflation problem has remained challenging enough for a Presidential candidate to call for outright price controls (on the notoriously high-margin grocery industry) less than three months out from the election. Bitcoin continued to bob along in its recent trading range this week, but with large financial institutions continuing to build positions and leading political figures trotting out centuries-old economic nonsense with a near-perfect record of failure, we still think it might make sense to get some just in case it catches on.

Portfolio Company Spotlight

Start9 provides software and hardware to empower users to easily take control of their digital lives by self-hosting their own personal servers independent of third parties. With intuitive mass market software and one-click installations of popular programs like Bitcoin Core, Mempool.space, various lightning implementations, and 30+ other services, Start9 enables a move away from the current computing paradigm of custodial services that limit privacy, data integrity, and personal autonomy. The company’s exciting roadmap aims to do for personal servers what Microsoft and Apple did for personal computing, which we expect to become progressively more valuable over the coming decades as financial and tech counterparties become less reliable and more invasive.

Selected Portfolio News

Strike launched ACH capabilities for business accounts:

Media

Ten31 Managing Partner Matt Odell hosted a fireside chat with Tennessee Attorney General Jonathan Skrmetti at Bitcoin Park during last month’s Bitcoin 2024 conference. Matt also hosted a longer discussion with the Attorney General on Citadel Dispatch.

Fold Founder and CEO Will Reeves appeared on the Bitcoin for Millennials podcast to discuss Fold’s integration of bitcoin into everyday consumer activities.

Market Updates

Markets broadly saw quite the reversal from last week’s volatility, as the S&P500 ripped off a ~7% move for its best week of the year to push the index back toward all-time highs and the VIX index fell back toward early summer lows.

Upward momentum was bolstered by the latest CPI print for the month of July, which showed the popular inflation gauge up 0.2% M/M and up 2.9% Y/Y, the lowest result in over three years. While the facts on the ground suggest the prices of key items may still be increasing much faster, the headline figures have continued to bolster expectations for near-term Fed easing.

The latest PPI numbers also showed a deceleration on the month, with the +0.1% M/M change coming in below consensus. That said, core measures within this gauge painted a less rosy picture of input inflation.

In contrast to the much worse than expected jobs report released two weeks ago, the latest US retail sales figures released this week showed a significant rebound and the highest M/M growth in nearly two years.

However, US housing starts have continued to struggle, with the metric reaching a 50-month low in July and diverging widely from the pre-COVID trend.

As the US reported (mostly) incrementally positive topline macro data, EU economic sentiment collapsed, with the Eurozone’s sentiment index plunging to 17.9, well below expectations and last month’s 43.7 reading.

The USDJPY pair, whose gyrations helped touch off last week’s rapid deleveraging, was largely stable on the week, though investors seem to already be building new positions in the popular trade that precipitated the selloff.

The latest quarterly 13Fs released over the past several weeks show institutions including Morgan Stanley, Goldman Sachs, and Wisconsin’s state pension fund starting or adding to positions in spot bitcoin ETFs.

Regulatory Update

Despite recent headline overtures toward the “crypto” lobby, Democratic Presidential candidate Kamala Harris has selected advisors that suggest her office would be likely to maintain the Biden administration’s general hostility toward bitcoin.

Meanwhile, in response to stubbornly high prices especially in key goods like groceries, Vice President Harris signaled this week that she would look to implement the time-tested strategy of price controls on grocery retailers, a notoriously high margin business.

The IRS released a proposed new form for cryptocurrency taxation that would go into effect for the 2025 tax year. Among other changes, the updated form would remove the requirement for taxpayers to specify wallet addresses and transaction identifiers.

Noteworthy

Ahead of a Twitter Spaces conversation between Donald Trump and Elon Musk early this week, European Union officials publicly pressured Musk to limit potentially “harmful content” in the discussion and on Twitter more broadly, an escalation of the EU’s attempt to regulate online speech even outside of its own jurisdiction.

Similarly unelected global bureaucrats at the UN passed a new “cybercrime” resolution ostensibly aimed at limiting online fraud and scams. The resolution has received heavy criticism for the dangers it potentially poses to privacy and personal data security.

The timing of this resolution poetically coincided with new reports that hackers may have compromised the Social Security numbers of virtually every American, illustrating the threat posed by the growing volume of laws and regulations requiring greater government and corporate surveillance of daily activity.

Apple announced it will soon allow app developers to offer in-app NFC transaction capabilities using an iPhone’s secure element, effectively opening up native “tap to pay” functionality for iOS bitcoin wallets.

OpenSats announced a new round of grants focused on development for Bitcoin Core, bitcoin’s most popular implementation.

Ten31 Timestamp