Ten31 Timestamp 881,815
The fragility of legacy markets and the blue-chip assets implicitly supporting the global financial system (as well as most Americans’ retirement funds) were on full display this week, as a new open source LLM out of China called into question key assumptions underpinning the massive run in AI-levered equities over the past two years, including several of the largest “Magnificent 7” stocks. While much is still yet to be hashed out and the huge downdraft – which saw GPU behemoth Nvidia shed $600 billion of market cap in a single day – may well have been a knee-jerk overreaction, the episode highlights just how much latent volatility is lurking beneath the surface of the cornerstone assets that market consensus has deemed the must-own stocks for any responsible portfolio. To the extent something like the bear case on AI capex actually plays out, or if growing fears just serve to deflate the P/E multiples of these stocks (many of which sit comfortably north of 30x), the resulting equity market drawdown could have noteworthy implications for US tax receipts, the already challenged US Treasury market, and ultimately monetary policy. As a result, we wouldn’t be surprised to see more market volatility coming down the pike, particularly given the new aggressive tariffs on Canada and Mexico set to go into effect today, and much of this volatility may spill into bitcoin’s near-term price action – though we would note the orange coin has held up remarkably well in the face of all the recent chop. However, in our view, this week just further exposes the cracks in the facade of the current market structure and reemphasizes the long-term fundamental value of a neutral reserve asset with a fixed supply, as well as equity in the best companies with leverage to that asset.
Portfolio Company Spotlight
OpenSecret – formerly known as Mutiny – offers a suite of security tools to provide private encryption by default to protect both end users and app developers. The company’s platform offers solutions for private key management, encrypted data syncing, confidential compute, and private AI applications that will all become increasingly necessary as the volume of data shared between users and their applications grows and the resulting cost of data breaches – which already drive losses of ~$15 billion per year – continues to increase. The company recently launched Maple AI, a highly private alternative to popular AI chat applications like ChatGPT and DeepSeek.
As the world’s largest investor focused entirely on bitcoin, Ten31 has deployed nearly $150 million across two funds into more than 30 of the most promising and innovative companies in the ecosystem, and we expect 2025 to be the best year yet for both bitcoin and our portfolio. Visit ten31.vc/funds to learn more and get in touch to discuss participating.
Selected Portfolio News
OpenSecret publicly launched Maple AI, its new end-to-end encrypted AI chat tool, which allows for highly private AI chat interactions with flexible pricing:
Media
Strike Founder and CEO Jack Mallers joined the Coin Stories podcast to discuss the prospects for a US strategic bitcoin reserve, DeepSeek, and more.
River Founder and CEO Alex Leishman appeared on the What Bitcoin Did podcast.
AnchorWatch Co-Founder and CEO Rob Hamilton released a new video walking through some recent updates to the company’s Trident Vault platform.
Market Updates
The US equity market took a bath on new concerns about the impact of DeepSeek, an open source Chinese LLM with performance comparable to best of breed Western models yet ostensibly trained for a tiny fraction of the cost.
Investors aggressively sold anything with leverage to AI capex on fears that this model could mean significantly less spend might be required to build out the infrastructure necessary to support high-powered AI applications. Casualties included power and utility players, many of which were off more than 20% on the news, and GPU kingpin Nvidia, which dropped nearly $600 billion of market cap in the biggest absolute single-day stock decline in history.
Naturally, multiple caveats apply here, including various reports highlighting that DeepSeek was likely much more expensive to train than was initially reported, and that Jevon’s paradox will likely be operative in this industry just as it has been in other markets. All the same, this was a clear shock to up-only assumptions about US AI stocks and has left investors questioning the durability of major tech stock valuation multiples.
The market attempted to gather its wits during the week, but got another shock on Friday as President Trump indicated new tariffs as high as 25% on key goods from Mexico, Canada, and China will go into effect as planned starting on February 1, pushing equity indices back down to end the week.
Against the volatile backdrop, the Federal Reserve held its benchmark interest rate target steady as expected, with slight tweaks to commentary suggesting the central bank has grown less confident on the path of inflation.
Meanwhile, the latest Core PCE figures – the Fed’s preferred metric for gauging inflation – increased 0.2% M/M in December, in line with consensus forecasts. The metric was up 2.8% Y/Y, showing key metrics stubbornly above the ostensible 2% target, while key goods like eggs – which are excluded from this index – have ripped to new all-time highs.
Real consumer spending was up more than expected M/M for the fastest uptick since early 2023, supported at least in part by expanding consumer credit card balances, which are now substantially above pre-COVID levels.
Q4 US GDP came in up 2.3%, good for +2.5% on the full-year but below expectations and the 3.1% figure posted in Q3.
After years of stress, US commercial real estate may be starting to show some signs of life, as total US office building sales actually grew Y/Y in 2024 for the first time in three years – albeit from a very depressed baseline – on the back of increasing seller willingness to take haircuts.
Following a shallow trough during the Fed’s 2022 hiking cycle, US M2 money supply has definitively inflected back up and is now pushing close to new all-time highs.
Regulatory Update
Texas Lieutenant Governor Dan Patrick’s office released a list of priority bills for the 2025 legislative session which includes a bill to establish a strategic bitcoin reserve.
Meanwhile, a South Dakota legislator announced plans for a state SBR bill, and lawmakers in Indiana introduced new legislation that would allow state pension funds to invest in bitcoin ETFs.
Elsewhere, a Missouri Senator introduced his own bill to protect self-custody rights and allow the state to allocate up to 10% of public funds to bitcoin. Fifteen states have now introduced some form of strategic bitcoin reserve legislation.
This theme has continued to gain traction overseas as well, as the head of the Czech National Bank suggested this week he would like to add billions of euros of bitcoin to the bank’s reserves, and the CNB later officially said it will evaluate adding “additional asset classes” to its investments.
Despite this international momentum, ECB President and prominent fiat enjoyer Christine Lagarde dug in her heels further and said she’s “confident” that bitcoin will never be included in ECB reserves.
As government treasuries and central banks around the world evaluate how best to build and protect their reserves, the Bank of England is facing an awkwardly timed gold shortage that has foreign central banks waiting at least four weeks for gold deliveries (up from just a few days during normal periods).
The US Senate officially approved Scott Bessent as Treasury Secretary. This appointment has been a focal point for bitcoiners and sound money advocates given Bessent’s historical discussion of the need for a realignment of the post-1971 international financial order.
The Department of Defense’s DARPA division announced plans to launch a new “anticipatory” anti-money laundering program that would seek to use even more advanced surveillance to stave off illicit financial activities, which could have concerning implications for civil liberties already threatened by AML programs that have shown notably limited effectiveness.
Noteworthy
MicroStrategy raised $563 million for more bitcoin purchases through the launch of the company’s first perpetual preferred stock vehicle.
Lightning Labs and stablecoin giant Tether announced the launch of USDT on the lightning network via Lightning Labs’s Taproot Assets protocol.
Coinbase CEO Brian Armstrong indicated the massive crypto exchange is now seeing roughly 1 million new coins created per week, highlighting the fragmentation of liquidity that ultimately dooms all bitcoin challengers.
Kentucky utility Paducah Power said this week that bitcoin miners consume 20% of their current power production, up from 4% last year. The group expects miners to consume up to 33% by the end of 2025 and suggested the miners are “good customers” that have helped to reduce residential electricity rates.
X (fka Twitter) announced a new deal with Visa to enable in-app payments, bringing the platform closer to Elon Musk’s previously stated goal of allowing users to “conduct their whole financial lives” within X – a particularly tenuous proposition given the censorious history of centralized social media platforms.
Travel
Nashville BitDevs, Feb 18-19
Austin BitDevs, Feb 20
Bitcoin Investor Week (New York), Feb 24-28
Austin Bitcoin Takeover, Mar 14