Ten31 Timestamp 867,444
Key US bond yields continued to move higher this week, extending an upward trend that began approximately the day the Federal Reserve cut its benchmark Fed Funds Rate by 50bps in September. The long-dated Treasury complex has now diverged notably from the historical trend established by prior rate cutting cycles, suggesting growing fears about entrenched inflationary pressures that are not likely to be silenced by either incoming administration. Prominent investors Paul Tudor Jones and Stanley Druckenmiller have given voice to these exact concerns in recent weeks, and while there may be some book-talking of fully-sized trades at play here, it’s tough for us to disagree given the state of federal debt and unfunded liabilities, as well as M2’s recent positive inflection back toward 2021 levels. Against this backdrop, the market got its latest hint of mainstream bitcoin adoption this week, as the 2024 proxy statement for Microsoft – yes, that Microsoft – includes a measure to evaluate adding bitcoin to the company’s corporate treasury. While the Board officially recommends against the proposal, the fact that such a move is even being publicly discussed at one of the largest companies in the world represents a noteworthy latest development in bitcoin’s ongoing mindshare growth among large institutions and corporations, as well as a clear indication that bitcoin can no longer be entirely ignored or dismissed by fiduciaries.
Portfolio Company Spotlight
AnchorWatch provides bitcoin insurance policies powered by innovative use of Miniscript technology. The company’s Trident Vault platform leverages bitcoin’s native properties to offer bitcoin holders and fiduciaries an intuitive, enterprise-grade collaborative custody solution that allows for highly composable and dynamic custody schemes, all with the backing of regulated insurance products that further mitigate risks of theft, key mismanagement, natural disasters, and more. Trident Vault, which integrates with most popular bitcoin signing devices, was designed with distributed teams and complex workflows in mind, and AnchorWatch’s embedded specie insurance offerings are set to unlock further bitcoin adoption among various enterprises and institutions of all sizes.
Selected Portfolio News
River rolled out a new offering allowing users to generate bitcoin-denominated interest on cash deposits held on the platform:
Unchained added a new feature to enhance security for vault deposit addresses:
Media
Ten31 Advisor and Zaprite Head of Business Development Parker Lewis joined Ten31 Managing Partner Marty Bent to discuss the importance of infrastructure supporting bitcoin payments.
River Founder and CEO Alex Leishman appeared on The Investors Podcast to discuss the company’s new bitcoin-denominated interest product.
StatMuse published its latest monthly Muse Letter.
Market Updates
The US 10-year Treasury yield continued its upward momentum, closing out the week at a multi-month high of 4.25%. The benchmark yield is now up 60bps in the 5 weeks since the Federal Reserve made its first cut to the Fed Funds Rate.
The increase in long-term yields despite the Fed’s cut suggests ongoing consternation among investors about the long-term path of inflation, particularly ahead of an election that looks likely to bring higher deficits regardless of its result. Prominent investor Paul Tudor Jones gave voice to those concerns this week, suggesting “all roads lead to inflation” and he’ll be shorting long-end Treasuries while buying gold and bitcoin.
The remarks concord with recent comments from Stanley Druckenmiller, another noteworthy macro investor and intermittent bitcoin bull, who suggested he has opened a significant short position on long-dated Treasuries.
This rise in Treasury yields has driven mortgage rates higher as well, with rates on 30-year fixed mortgages hitting a two-month high this week, up ~50bps since the Fed’s September cut.
The recent reversal in mortgage rates – which are still down over a point from last October’s high – has helped further crimp an already weak housing market, driving US existing home sales to a 14-year low.
As US home affordability continues to sit near all-time lows, a new Fannie Mae report out this week suggested the path to affordability levels seen even five years ago would require significant declines in home prices and / or mortgage rates.
Meanwhile, the P/E on the S&P Index reached its highest level since 2000 this week, surpassing even its 2021 peak, and bond spreads for both investment grade and high yield issues are the tightest they’ve been since summer 2007.
As homebuyers continue to struggle with elevated prices, stonk multiples continue to expand, and spreads compress, US M2 ticked up again in September, and the metric is now increasing faster than its pre-pandemic trend, a factor unlikely to quell upward pressure on asset prices.
Bankruptcy filings for publicly traded restaurants through the year have now matched the total from 2023, the highest level since the lockdowns of 2020 and well above pre-COVID trend.
Microsoft’s latest proxy statement includes a proposal to evaluate an investment in bitcoin. While the Board officially recommends against the proposal, shareholders will have the opportunity to vote on the concept prior to the annual meeting on December 10.
Spot bitcoin ETFs posted another strong week despite more rangebound bitcoin price action, as the vehicles took in nearly $1 billion (following last week’s $2 billion+ net inflow).
Regulatory Update
The Minneapolis Fed published a new research paper surveying bitcoin’s impact on the government’s ability to run permanent deficits. The paper posits both that bitcoin is useless and – in the same paragraph – that it is so useful as an alternative to fiat currencies that it needs to be banned.
The Pennsylvania House of Representatives introduced a bill aimed at protecting constituents’ rights to self-custody bitcoin and use it as payment. The bill will still need approval from the state’s Senate and Governor.
Denmark’s tax authority has recommended an unrealized capital gains tax for bitcoin and other cryptocurrencies, with a rate potentially as high as 42%. The news comes a week after Italy proposed increasing capital gains tax rates on bitcoin from 26% to 42%.
As various countries in the West adopt a more adversarial stance toward bitcoin, participants at this week’s BRICS summit spent some of the week discussing using bitcoin as an alternative means of international settlement.
The Wall Street Journal reported that the US federal government is considering sanctions of stablecoin behemoth Tether, though Bitfinex CEO Paolo Ardoino described the report as inaccurate.
A new report out this week suggests that some of Presidential candidate Kamala Harris’s advisors have previously expressed an intent to “kill Musk’s Twitter,” a reminder of the value of decentralized communications protocols like Nostr that lack a CEO or single company to target.
Noteworthy
Prominent research shop Bernstein published a 160-page “Black Book” covering bitcoin for a Wall Street audience. The publication lists a conservative bitcoin price target of $200,000 for year-end 2025.
The Bitcoin Policy Institute published a report advocating for bitcoin as a valuable central bank reserve asset.
R3, one of the original acolytes of “enterprise blockchains” and whose investors include Bank of America, Intel, and others, is reportedly exploring strategic alternatives including a sale. The move would mark the latest evidence against the “blockchain, not bitcoin” thesis prominent in prior cycles.
An alert issued by FinCEN this week suggested Hezbollah’s favored means of financing do not include bitcoin or other cryptocurrencies.
KYC on-ramp Transak announced a data breach affecting nearly 100,000 users, the latest incident in a long line of examples of the vulnerabilities posed by centralized pools of sensitive user data.
Travel
Nashville BitDevs and Nostrville, Nov 5-6
Austin BitDevs, Nov 21
BitcoinMENA, Dec 9-10