Ten31 Timestamp 902,190
A confluence of headlines highlighted the increasingly stark reality of the US’s precarious fiscal position this week. First off, the Social Security Administration pulled forward its estimates for depletion of its trust fund by a year, with the agency now projecting it will operate at an annual deficit starting in 2029 and will hit zero in 2034, at which point either benefits will be slashed significantly, or Congress will have to authorize new funding sources (we’ll let readers place their own bets on which is more likely). Meanwhile, the latest Treasury International Capital (TIC) data report came back showing foreign holdings of US debt generally stable, but with underlying foreign government holdings stagnating or declining as most net buying continues to come from financial buyers (read: hedge funds) in the UK, Caymans, and a few other localities. Finally, Jerome “Too Late” Powell and the FOMC once again held the benchmark Fed Funds Rate steady, keeping rates elevated even as the US prepares to set yet another federal borrowing record this year.
As a result, the name of the game continues to be finding new places to stuff Treasury issuance, and the government got a few wins on that front this week, most notably with the Senate’s passage of the GENIUS Act, a framework to encourage the proliferation of stablecoin activity in the US and worldwide (and, by extension, the proliferation of new marginal buyers of Treasury bills). Banking regulators also appear to be moving closer to an update to capital requirements that would increase bank balance sheet capacity to hold Treasuries, as the Fed just scheduled a meeting for this coming week to discuss the issue. Major equity indices, the 10-year US Treasury yield, the DXY, and bitcoin have all largely bounced around in a fairly tight range over the past month as investors weigh the prospects for escalating conflict in the Middle East and the potential for trade deals ahead of July’s tariff pause expiration, but we continue to think the long-term direction of all these key indicators remains fairly clear given the fundamental fiscal dynamics at play.
Portfolio Company Spotlight
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Selected Portfolio News
Fold announced the close of a $250 million ELOC facility, which will give the company flexibility to opportunistically pursue its bitcoin treasury strategy over time:
AnchorWatch launched a new bitcoin inheritance product leveraging the company’s unique technology stack and 1:1 insurance from Lloyd’s of London:
Primal launched Primal Studio, a full suite of advanced tools for content creators and teams managing corporate accounts:
Primal also rolled out the latest version of its app, including many new features and upgrades:
Debifi announced it has exited its beta, opening up the platform – which already has dozens of institutional partners – for broad use:
Media
Ten31 Managing Partner Marty Bent appeared on the Build with Bitcoin podcast to discuss the latest developments in bitcoin ecosystem investing.
OpenSecret’s Maple AI iOS app was banned from the app store in China, a nice endorsement of the privacy protections Maple can offer.
Market Updates
Despite being called just about every name in the book by the Commander in Chief, Federal Reserve Chairman Jerome Powell informed the world that the US central bank will continue to hold steady on its benchmark rate for the time being, noting the FOMC still wants to see more information on tariffs and inflation.
However, the latest dot plot still points to two rate cuts in the back half of the year, and Fed Governor Christopher Waller indicated that cuts could start as soon as July.
In contrast, on the other side of the pond – where most central banks are firmly in accommodation mode – the Swiss National Bank officially returned to ZIRP this week and would not rule out negative interest rates.
Trump, predictably, was not pleased with the Fed’s decision, arguing the Fed Funds Rate should be at 1-2% to save the country $1 trillion in annual interest, and once again threatened to fire Powell.
As “Total and Complete Moron” Powell and team continued to drag their feet on rate cuts, the central bank also announced a meeting set for next Wednesday focused on potential changes to the Supplementary Leverage Ratio, which governs (among other things) the capital charges imposed on US banks for holding government bonds.
Shortly thereafter, Bloomberg reported that the Fed and other key bank regulators are planning to substantially reduce capital requirements for Treasury holdings while not fully eliminating them, though regulators are likely to seek public comment on doing away with the requirement altogether.
These moves, which have been telegraphed for months by Treasury Secretary Scott Bessent, aren’t coming a minute too soon given the latest projections released by the Social Security Administration this week, which now forecast the Social Security trust fund will be underwater by 2029 (a year earlier than previously expected) and fully depleted by 2034, a backdrop that will put further upward pressure on government borrowing needs.
Meanwhile, the latest data on net capital flows to the United States showed relatively stable foreign government holdings of US Treasuries, though just running in place is notably not enough to finance US fiscal needs over any meaningful amount of time (particularly when most overall incremental buying from private entities looks to be coming from trigger-happy financial buyers out of the UK and the Caymans).
Against the backdrop of an increasingly dysfunctional US trade and fiscal position, one US bank executive said this week that many foreign exporters no longer want to receive settlement in dollars, an interesting signpost even if likely limited in its net impact for now.
In that same vein, the Governor of the People’s Bank of China gave a speech this week calling for a move away from the modern dollar system toward a multi-polar framework partially underpinned by the digital yuan, some of the most explicit public comments on that topic from a senior Chinese official since the start of global trade tensions.
That transition may not be so easy to swing, though, as reports this week pointed to growing stress to international trade partners from massive diversion of Chinese exports to non-US markets.
The EU, meanwhile, is reportedly weighing a UK-style trade deal with the US and canceled a meeting with China this week due to growing trade disputes, both potential signs of improving leverage for the US.
Back in the US, the Senate overwhelmingly passed an updated version of the GENIUS Act, a legal framework for stablecoins. The bill will now move to the House of Representatives, which has already passed a similar bill.
President Trump immediately hailed the bill’s passage as a major victory, and Secretary Bessent again promoted the potential for stablecoins to unlock significant incremental demand for US Treasuries (though we note it remains to be seen how much demand for domestic stablecoin use can actually be ginned up).
Tether CEO Paolo Ardoino took to CNBC to echo Bessent’s message, calling stablecoins a means of extending US dollar hegemony.
As spot bitcoin ETFs extended their multi-week streak of net inflows, Spanish bank BBVA is reportedly now telling its high net worth clients to invest up to 7% of their assets in bitcoin, noting that “at 3% you are not taking a huge risk.” We encourage readers to keep an eye on the way that these suggested allocations are inevitably drifting slightly higher and higher over time.
Regulatory Update
Arizona’s state legislature revived its strategic bitcoin reserve bill, which was recently vetoed multiple times by the state’s governor (though unlike the original version, the latest iteration does not include a provision to invest up to 10% of state funds in bitcoin).
Legislators in Ukraine’s parliament officially introduced a bill to allow the country to invest public funds in bitcoin.
Norway announced a moratorium on new bitcoin mining developments as part of the government’s “clear intention to limit the mining of cryptocurrency as much as possible.”
Noteworthy
Banking networks and ATMs throughout Iran were rendered inoperable by Israeli hackers this week, highlighting (regardless of your views on the conflict) the benefit of permissionless outside money like bitcoin – which is admittedly harder to use when your country’s internet access has been entirely disabled, though no harder than a borked banking app.
As the stablecoin meme continues to accelerate, JP Morgan announced it aims to launch a “deposit token” called JPMD, a permissioned token available only to the bank’s institutional clients to enable “onchain, cross-border B2B transactions.” Somehow we feel like we’ve seen this movie before.
Travel
Bitcoin Policy Summit, Washington DC, June 25-26
Nashville Bitdevs, July 8
Austin Bitdevs, July 17