Ten31 Timestamp 862,244
Following the fastest rate-hiking cycle in history (which still failed to take benchmark rates higher than levels last seen in ~2006), the Federal Reserve finally gave the market what it had been clamoring for since 2022 in the form of its first cut to the Federal Funds Rate since the onset of COVID. The central bank opted for a more aggressive opening shot by cutting 50bps (rather than the standard 25) and signaled plans for another 50bps of aggregate cuts through the end of the year, possibly the result of weakening employment and output data points that have cropped up over the past few months (and / or the ballooning federal interest burden that will become the government’s largest line item in just a few quarters). While long-duration US government bonds reacted unfavorably given questions about whether underlying price inflation has truly been tamed, US stock indices did what they do best, moving up to yet another all-time high on apparent confirmation of the return of easier monetary policy.
We found it poetic that this hotly anticipated Fed update would coincide with two less headline-grabbing but potentially significant policy updates for bitcoin. First off, new reports this week indicated that BNY Mellon – the largest institutional custodian in the world – had received the first exemption from SAB-121 accounting guidelines that have historically prevented traditional banks and custodians from holding bitcoin for clients. Then to close out the week, the SEC approved new options for BlackRock’s IBIT ETF, potentially bringing significant new liquidity dynamics to the bitcoin ETF market. While it’s anyone’s guess what the balance of macro factors actually signal (years of uncomfortable stagflation, a two-tiered economy wherein asset holders continue to rake in nominal paper wealth while underlying productivity declines, a near-term deflationary bust, or something else entirely), it’s clear that institutional interest in and acceptance of bitcoin is accelerating just as the Fed is returning to a less restrictive stance, which we think bodes extremely well for bitcoin and the companies building its critical infrastructure over the coming decade.
Portfolio Company Spotlight
Strike is an emerging fintech and payments innovator leveraging the lightning network to allow consumers and merchants to send and receive payments instantly and cheaply in a wide variety of settings. Strike's offerings include a consumer app – now available in nearly 100 countries including the EU – for P2P payments, bitcoin purchases, global remittances, and more. Strike also offers a suite of APIs for merchants and enterprises to easily benefit from lightning’s low cost, near-instant settlement. The company has announced a variety of exciting new features over the last few months and continues to have one of the most robust pipelines of upcoming launches in the bitcoin ecosystem.
Selected Portfolio News
Republican Presidential candidate Donald Trump made a highly publicized bitcoin transaction at New York’s Pubkey bar using a Strike wallet and a Zaprite point of sale interface:
Strike significantly reduced fees for international bitcoin purchases with debit cards:
Strike also added support for outgoing wires:
River launched a new proof of reserves feature for greater transparency around user funds held on the platform:
Media
Strike Founder and CEO Jack Mallers appeared on Rick Rubin’s Tetragrammaton podcast to discuss bitcoin, his vision for Strike, and much more.
Unchained Co-Founder and CSO Dhruv Bansal contributed to a KPMG report on key considerations for institutional bitcoin custody.
Unchained’s Tom Honzik published a deep dive into the technical details underpinning bitcoin private keys.
Market Updates
Headlines this week were dominated by the most closely watched Federal Reserve FOMC meeting in years, with the central bank finally delivering the cut to its benchmark rate that investors had been anxiously awaiting for nearly three years.
The Fed reduced its key rate by 50bps, in line with recently elevated market expectations but still not enough for some monetary policy experts in Congress, who penned an open letter to the Fed demanding a 75bps cut.
In addition, the latest “dot plot” of Fed governor projections indicated the central bank expects two more 25bps cuts by year-end and for the Federal Funds Rate to dip below 3.5% (vs 4.75-5% today) by the end of 2025.
Despite the decision being relatively well telegraphed in advance, equity indices ripped to new all-time highs once again following the update on Wednesday.
Interestingly, the yield on US 10-year Treasury bonds also moved up following the announcement, signaling ongoing bond market consternation about potentially entrenched inflation.
Meanwhile, despite the recent litany of weaker employment and output indicators that likely helped animate the more aggressive Fed rate cut pace this week, new data from the Commerce Department showed both US retail sales and manufacturing improved for the month of August.
Despite recent rhetoric about its determination to raise benchmark rates to normalize monetary policy – which helped send global financial markets into a brief tailspin last month – the Bank of Japan held its key rate steady at 25bps this week, even while acknowledging price inflation will likely run hotter in 2025.
As part of a public hearing of the Wyoming state legislature this week, BNY Mellon was identified as the first bank to receive exemption from the SEC’s SAB-121 accounting guidelines that have historically made digital asset custody prohibitively expensive for traditional banks, potentially signaling a clearer path for some banks to gain access to this market over time.
The SEC approved listing and trading of options for BlackRock’s IBIT spot bitcoin ETF, further cementing bitcoin’s growing role in traditional financial markets and opening up potentially meaningful new dynamics for price action over time.
Regulatory Update
The former Chief Administrative Officer of Silvergate Bank – one of the larger banks historically serving crypto-adjacent businesses and a notable casualty of spring 2023’s banking crisis – filed a declaration this week as part of the firm’s bankruptcy proceedings with assertions that seem to suggest “intense regulatory pressure” was the primary reason for the bank’s wind-down rather than impairment of Silvergate’s liquidity or solvency.
Former Presidential candidate Hillary Clinton suggested Americans engaged in spreading “propaganda” should face civil or even criminal charges.
Elsewhere in the protection of democracy, California Governor Gavin Newsom signed into law three bills criminalizing the use of artificial intelligence tools to create “deepfakes” intended to sway public opinion on upcoming elections.
Noteworthy
BlackRock, the world’s largest asset manager, published a new whitepaper pitching bitcoin as a “unique diversifier” whose long-term adoption will be driven by concerns over global monetary stability and the sustainability of the US’s fiscal trajectory.
The Kingdom of Bhutan, which confirmed last year that it has been mining bitcoin for a number of years, reportedly now holds over 13,000 bitcoin from its mining operations, making its bitcoin treasury the fourth largest among all sovereign holders.
The Human Rights Foundation announced a new round of grants to 20 bitcoin and nostr projects totaling 10 bitcoin.
Travel
Nashville BitDevs, Oct 8
Austin BitDevs, Oct 17
Portfolio Company Retreat, early October
Lugano Plan ₿ Forum, Oct 25-26
BitcoinMENA, Dec 9-10
Good