Ten31 Timestamp 897,112
Another busy week for the global economic reordering kicked off with the announcement of a 90-day “pause” of President Trump’s proposed sky-high tariffs on China. Treasury Secretary Scott Bessent, who led discussions with the Chinese side to reach an agreement on the pause, seemed to indicate that the US both does and doesn’t want a decoupling from China, a bit of “strategic uncertainty” that didn’t seem to concern investors, as equity indices rocketed higher and closed the week just a few points below all-time highs from earlier this year. While it’s unclear whether the goal is to box out China and create a new axis of US vassal states or just to win whatever marginal concessions the bond market will allow, the Trump administration followed up this announcement by heading to the Middle East to strike some eye-popping deals with Gulf States that would suggest the former path is still very much on the table (or maybe it’s just the latest development in a totally unrelated bromance). The media immediately took to calling these discussions the “Riyadh Accords,” though the talks conspicuously didn’t include any specific detail on the degree to which the oil-rich states might help to absorb US Treasury issuance, whose parabolic growth finally induced Moody’s to downgrade US debt by one notch this week. Cooling headline inflation prints (potentially supporting a path to Fed rate cuts) and changes to US banking capital requirements will likely help the federal debt picture on the margin, but the start of 13F season has shown many investors aren’t waiting around to find out, as several major economic actors (including many in the Middle East) have continued to aggressively ramp up their bitcoin exposure.
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Selected Portfolio News
Strike Founder and CEO Jack Mallers published additional detail about the company’s bitcoin-backed loans, including near-term plans for single-digit rates:
Fold launched bitcoin gift cards, which will soon be available in-store at major retail chains nationwide:
Primal launched a longform note editor, elevating the experience of producing longform content for Nostr:
OpenSecret rolled out its Maple AI app for iOS:
Media
Jack Mallers appeared on the Coin Stories podcast with Natalie Brunell to discuss bitcoin-backed lending and the bitcoin treasury strategy.
Market Updates
After hinting at good news over the weekend, Treasury Secretary Scott Bessent and US trade representatives announced that the US will pause its supplementary reciprocal tariffs on China for 90 days while keeping the 10% base rate and the 20% fentanyl-related charge in place, bringing the total duty down from 145% to 30%.
Following months of aggressive posturing from both camps, Bessent suggested this week that neither side in the US-China spat wants “a generalized decoupling” from the other, but also that the US does want a “strategic decoupling” from China on key goods and supplies (we unfortunately suspect this may be a bit like trying to get only a little pregnant).
Equity indices, which had already been on a tear from April lows, rallied aggressively throughout the week on Bessent’s vision of a “big, beautiful rebalancing”, surpassing “Liberation Day” levels and closing out the week just below all-time highs.
Interestingly, despite much consternation from the mainstream cognoscenti about the need for such a rebalancing, Bank of England governor Andrew Bailey suggested this week that, come to think of it, the US’s concerns on trade may have some merit. The talk track may or may not be related to growing concerns in Europe that Fed swap lines may not be available during future periods of stress.
The strong action in stocks was matched by yields on long-dated US Treasuries, with the 10-year spiking above the 4.5% mark – a level that has historically appeared untenable for the bond market – before retrenching a bit to finish the week.
Stubbornly high long-end rates are getting increasingly awkward, as the US federal deficit has continued to run at levels only previously seen in the depths of recession (DOGE wya?) and hedge funds domiciled in the UK and the Caymans have continued to climb the ladder of the largest US Treasury holders while China continues to de-risk on the margin.
These dynamics prompted rating agency Moody’s to finally capitulate, joining its peers as the last major agency to downgrade US federal debt by one notch on Friday after market close. It remains to be seen what kind of sentiment impact – if any – this will have on investors next week.
Notably, the Financial Times ran a piece this week highlighting that US regulators are preparing to rework the supplementary leverage ratio (SLR) to allow banks to hold more US Treasuries without penalty to their required capital ratios, enabling the US banking system to, in the words of the Bank Policy Institute, “support market liquidity during times of stress.” Secretary Bessent has historically been open about his desire to move forward with this change.
One potential tailwind for Treasuries was this month’s cooling of headline inflation, as CPI printed at +2.3% Y/Y, below consensus and the lowest reading since early 2021. Wholesale prices also came in much lower than expected, both of which could help shore up a path to benchmark rate cuts if the trend continues.
Less encouragingly, Wal-Mart suggested it will begin raising prices on goods affected by tariffs early this summer, and the University of Michigan’s 1-year inflation expectations index hit 7.3%, the metric’s highest reading since 1981 (though there may be a small bit of political skew here).
The survey’s consumer sentiment indicator also reached its second-lowest level on record, likely weighed down by both tariff uncertainty and 90-day credit card delinquencies surging to over 12%, the highest level since 2011.
After announcing the brief détente with China, the Trump administration touched down in the Middle East to announce a set of massive deals with Saudi Arabia, the UAE, and Qatar. Already popularly known as the “Riyadh Accords,” the deals include $600 billion of new spending on US defense and AI technology by Saudi Arabia, and an acceleration of the UAE’s $1.4 trillion commitment.
Thus far, the deals have not included any details on commitments to the US Treasury market, but the latest 13F filings out this week show that Abu Dhabi’s sovereign wealth fund increased its exposure to IBIT during Q1 despite the broad market selloff.
On the flipside, Wisconsin’s state pension fund, which previously made headlines for adding a >$100 million position to IBIT last year, sold its entire position during the first quarter. However, the fund added new exposure to COIN and MSTR during the same period.
Meanwhile, bitcoin’s 30-day volatility has fallen to the lowest level in roughly a year even as the orange coin’s price hung out above the seminal $100,000 level all week.
Regulatory Update
Senators Cynthia Lummis and Bernie Moreno submitted a letter to Treasury Secretary Bessent addressing the issue of taxes on unrealized gains for public companies with digital asset holdings, a dynamic that may gain focus as more “bitcoin treasury companies” hit the public markets.
After shooting down a bitcoin reserve bill several weeks ago, Arizona’s governor vetoed more bitcoin legislation this week.
Legislators in Ukraine are reportedly working on passing a bill to add bitcoin to the country’s national reserves, though the path forward for the law remains uncertain.
Noteworthy
Multiple companies announced their entries into the public market bitcoin treasury company arena, including Nakamoto, a holding company that has raised $700 million to run the playbook across a variety of targets.
Prominent crypto exchange Coinbase experienced a major data breach that exposed significant sensitive information of a subset of users. The incident is just the latest example of both the dangers of KYC/AML regulations that put users at risk and the need for more robust custody and insurance solutions for bitcoin holdings.
Steak n Shake rolled out its first terminals accepting bitcoin payments over the lightning network.
Travel
Bitcoin 2025, Las Vegas, May 27-29
Nashville BitDevs, June 10
Austin BitDevs, June 19
Bitcoin Policy Summit, Washington DC, June 25-26