Ten31 Timestamp 884,867
It was a middling week for most major asset classes, as uncertainty around tariffs, government spending cuts, and monetary policy continued to weigh on sentiment. The US saw a slew of unfavorable macro headlines including a precipitous PMI decline for February, higher recent inflation expectations, and weaker existing home sales, which all interestingly coincided with the latest FOMC minutes that pointed to a potential appetite for a near-term end to Quantitative Tightening (with the size of the Fed’s balance sheet still trillions of dollars above March 2020 levels). Just as notably, Japanese government bond yields extended their recent spike, touching nearly 1.5% mid-week for the highest level since 2009 as Japan’s inflation continued to pick up and the BOJ remained in a rate-hiking posture (for now). The JPY/USD cross has also been strengthening aggressively over the same time frame, falling this week to levels that corresponded with last summer’s dramatic “Yen carry trade” unwind. The rapid rise in yields has already started to drive stress for at least one large Japanese bank and bears monitoring in the near term given the hundreds of billions of US Treasuries held by Japanese commercial banks. Amid the macro uncertainty, large crypto exchange ByBit lost nearly $1.5 billion of Ethereum on Friday in the largest crypto exchange hack in history. Exact details behind the hack are still emerging, but it seems clear that it was at least partially the result of the large attack surface enabled by Ethereum’s complexity, the inevitable downside of the greater expressivity and functionality championed by many altcoin promoters. The incident is yet another reminder that, as the world seeks safe assets and attractive financial alternatives in a progressively more turbulent macro environment, there is no second ₿est.
Portfolio Company Spotlight
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Selected Portfolio News
Fold officially began trading on the Nasdaq under the ticker FLD:
Strike added new features including callback support and transaction notes:
Vida announced it has completed SOC2 compliance certification:
Coinkite’s Coldcard added enhanced miniscript capabilities – compatible with coordinators like AnchorWatch’s Trident Vault – to its latest Edge firmware:
Media
Fold Founder and CEO Will Reeves joined the Schwab Network to discuss the company’s public listing and outlook.
AnchorWatch Co-Founder and COO Becca Rubenfeld appeared on the What Bitcoin Did podcast to delve into AnchorWatch’s unique policies and capabilities.
Market Updates
Japanese government bond yields continued to skyrocket this week, with the country’s 10-year Treasury yield now up ~40bps from the 1% level where it opened the year.
The move brings the rate to its highest level since 2009, which has become a major headwind for some of the country’s largest banks, including Norinchukin, whose CEO announced his resignation this week amid growing losses on the bank’s government bond holdings.
In a related development, Japan’s price inflation hit a multi-year high of 4% this week, a force sustaining both upward pressure on yields and bets on further rate hikes from the Bank of Japan (though the BOJ commented this week that it will take action as necessary to deal with rising yields).
The Japanese Yen has also strengthened quickly over the past month, breaking the 150 level for the first time since last summer’s global Japan-led selloff.
Back in the US, the latest macro headlines were particularly unfavorable this week, as US Composite PMI for February was down substantially M/M for the lowest reading since September 2023, just barely above contraction territory.
At the same time, the latest University of Michigan inflation outlook index pointed to long-term consumer inflation expectations of 3.5%, the highest reading in 30 years.
Meanwhile, seasonally-adjusted existing home sales were down 5% M/M, ending a recent streak of monthly improvements, and credit card delinquencies of more than 90 days set a new 13 year high.
Against that backdrop, the minutes out of the latest FOMC meeting showed Federal Reserve officials considering a pause of Quantitative Tightening (whereby the Fed strategically allows maturing securities to roll off its balance sheet without replacing them), as well as a concern that reserves in the banking system might fall below adequate levels in the near term.
While potentially positive for liquidity on the margin, we’d also note that such a development likely wouldn’t mean the imminent return of Quantitative Easing.
In the same vein, Fed Governor Christopher Waller noted this week that economic uncertainty from the shifting policies of the Trump administration shouldn’t delay further rate cuts if the Fed sees any further progress on inflation.
As the Fed weighs the appropriate size of its balance sheet, China’s holdings of US Treasuries just fell to their lowest level since 2009. While there’s some nuance to the total UST balance the country may control through offshore entities, the upshot is that China still has not purchased net new USTs for over 10 years despite generating trillions in cumulative trade surpluses over that period.
Despite recent calls for the Treasury to return to more normalized terming out of its debt and to move away from excessive funding on the short end of the curve, Treasury Secretary Scott Bessent publicly noted this week that the US is still “a long way” from being able to normalize its issuance.
Bessent also suggested he and the administration are not considering revaluing the US’s gold holdings within a recently announced sovereign wealth fund after a massive spike of gold inflows back to the US over the past month.
As budget deficits explode and the Trump administration grapples with cuts to wasteful spending, Elon Musk floated the idea of using savings from the DOGE initiative (which maybe total ~$55 billion so far) to send $5,000 “dividends” to all taxpaying Americans (a total payout in the hundreds of billions to trillions).
The weak headlines and macro uncertainty pushed equities down over the course of the week, with major indices selling off hard into Friday’s close.
Bitcoin, meanwhile, continued to chop in the high $90,000 range this week, almost breaching the $100,000 level before retrenching on Friday. ETFs have generally seen modest outflows for the past two weeks.
Regulatory Update
At an event sponsored by Saudi Arabia’s sovereign wealth fund, President Trump boasted about his contribution to bitcoin’s recent price action and reiterated his interest in making America the “crypto capital of the world.”
Cantor Fitzgerald CEO and longtime bitcoin advocate Howard Lutnick was confirmed as Secretary of Commerce this week. Lutnick promptly told the press that he wants to end the IRS in favor of a new comprehensive tariff system while bringing tax and interest rates “smashing down.”
Kash Patel – who has disclosed holdings of over $100,000 in bitcoin ETFs and public miner stocks – was also confirmed as FBI Director this week.
The Governor of the Czech National Bank (which recently began evaluating adding bitcoin to its reserves) posted a Twitter thread explicitly differentiating bitcoin from all other “crypto.”
The US Marshals service, which is ostensibly responsible for custodying bitcoin seized by the US federal government, is reportedly struggling to verify how much bitcoin it actually holds, a perplexing development for an asset with a simple, public, freely auditable ledger.
The SEC dropped its yearslong lawsuit against Coinbase, which had alleged among other points that Coinbase is operating as an unregistered securities broker.
Noteworthy
Crypto exchange Bybit lost nearly $1.5 billion of Ethereum as part of an attack that marks the largest exchange hack in history (by concurrent dollar value).
The hack appears to have been executed by North Korea’s infamous Lazarus Group, which has been responsible for other crypto hacks in the past, and seems to have been at least partially enabled by Ethereum’s inherent technical complexity and resulting attack surface.
MicroStrategy announced a new $2 billion convertible bond offering this week. Notably, Goldman Sachs and Morgan Stanely served as bookrunners on the deal for the first time.
Fidelity Digital Assets published a new report on the growth and maturation of bitcoin’s lightning network.
Asset manager VanEck released a calculator showing how a US strategic bitcoin reserve could impact the US’s federal debt burden over time.
Travel
Bitcoin Investor Week (New York), Feb 24-28
Austin Ten31 Tribe Event, Mar 13
Austin Bitcoin Takeover, Mar 14