Ten31 Timestamp 922,734
The uncertainties and liquidity constraints of the ongoing government shutdown drove a tough few days for equity indices, which shed several points for the worst week since President Trump pulled out the Big Board in the Rose Garden. This increasing liquidity tightness continued to manifest in the repo market, as SOFR spiked to abnormally high spreads before the largest draw on the Standing Repo Facility since 2020 extinguished the pressure, at least for now. The talk track among the policy wonk class has shifted to clear acceptance of the need for some meaningful Fed balance sheet expansion in response, though it remains unclear if all parties at the table are ready to embrace that reality as eagerly as others. Bitcoin wasn’t immune to the bearish sentiment, briefly dropping as low as ~$99,000 for the first time since June before recovering the $100,000 level a couple times and holding above there as of this writing. As always, the magic line artists on both sides came out in earnest, and we’ll let readers take their own view on whether we’re looking at a failure at the 50WMA or a common Fib retrace.
In weeks like these, we like to zoom out and ask ourselves what the bigger picture tells us. Assuming bitcoin continues to function as expected – as a global, credibly neutral protocol for trustless value transfer whose native bearer unit has a verifiably fixed supply – what do we think is likely to happen as a system preprogrammed for constant liquidity injections continues to ramp up its native unit debasement just to keep the wheels spinning? What do we think is likely to happen as the historically indebted global hegemon who built this system and its resulting trade imbalances struggles to claw back decades of supply chain internationalization to the domestic sphere? As more under-30 voters push back against being priced out of upward mobility and elect charlatans promising free stuff to lead our major cities? As the incumbent power declares a “national housing emergency” and “runs it hot” in response to buy back votes and keep its interest burden manageable? As the tech giants enabling that aggressive nominal growth become “too big to fail” and end up with a backstop from the same overextended hegemon trying to hold this all together?
Perhaps some readers object that bitcoin can’t benefit from these trends long-term because it’s destined to fail for some technical or economic reason – fair enough, though we humbly submit that all your objections may be weaker than you think.
But let’s say it doesn’t fail: what do you think is likely to happen?
Portfolio Company Spotlight
Strike is an emerging fintech and payments innovator leveraging bitcoin and the lightning network to allow consumers and merchants around the world to accumulate bitcoin while sending and receiving payments instantly and cheaply in a wide variety of settings. Strike’s offerings include a consumer app – now available in nearly 100 countries including the EU – for bitcoin purchases, bitcoin-backed lending with some of the lowest rates available, P2P payments, global remittances, and more. Strike also offers a suite of APIs for merchants and enterprises to easily benefit from lightning’s low cost, near-instant settlement. The company has announced a variety of exciting new features over the past year and continues to have one of the most robust pipelines of upcoming launches in the bitcoin ecosystem.
As the world’s largest investor focused entirely on bitcoin, Ten31 has deployed over $200 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.xyz/invest to learn more and get in touch to discuss participating.
Selected Portfolio News
Strike announced it now offers business loans for UK customers:
Strike also rolled out its lending product to Idaho residents:
Satoshi Energy announced a new collaboration with Gridmatic and Cholla Inc to offer automated invoicing and payments for better risk management and capital efficiency:
Maple AI added a new anonymous accounts feature for enhanced privacy:
Media
Unchained Co-Founder and CEO Joe Kelly joined the Bitcoin Frontier podcast to discuss some of the core ideological principles behind bitcoin.
Debifi’s collaboration with Swiss Bank Sygnum on bitcoin-collateralized lending was featured on CoinDesk.
Market Updates
The tight liquidity backdrop highlighted in this newsletter and elsewhere over the past month reached a local crescendo late Friday, as the overnight lending benchmark SOFR spiked to well north of what should be its typical ceiling.
The rate gradually normalized over the course of the week, but not before the Fed’s Standing Repo Facility was tapped for $50 billion, far and away the highest draw since summer 2020, as banking system reserves remain at multi-year lows.
In a speech this week, New York Fed President John Williams cited this tightening liquidity environment as a reason that the central bank will need to begin expanding its balance sheet soon, as previewed by Fed Chairman Jerome Powell last week. Williams stressed, however, that any moves in this direction will be purely technical rather than a true shift in monetary policy.
Interim Fed Governor Stephen Miran also appeared on a podcast this week to echo a similar message regarding reserve tightness, while making his case for faster interest rate cuts to avoid triggering what he views as avoidable weakness in the labor market. Notably, Miran sounded confident on a December rate cut despite more mixed comments from Powell last week.
On the point of the Fed’s balance sheet, former Fed trader Joseph Wang suggested that the Fed will need to expand its balance sheet by $300-500 billion per year (after reducing it by ~$700 billion per year during the Quantitative Tightening of the past few years) to accommodate the exploding use of repo and structurally higher TGA needs.
Exacerbating the impact of tighter liquidity on asset prices, dollar strength maintained its recent upward impulse, with the DXY Index breaking the 100 level for the first time since May.
In a closely watched proceeding that may be a key lever influencing the forward path of interest rates and dollar strength, the Supreme Court finally convened this week for the first hearing on the Constitutionality of President Trump’s tariff regime (enforced thus far, perhaps dubiously, under IEEPA emergency powers).
The line of questioning from the Justices was reportedly highly skeptical, and betting markets now reflect low odds that the Court will rule in the administration’s favor, potentially creating new uncertainty around the status of the tariffs.
However, Treasury Secretary Scott Bessent indicated that the administration has many alternative paths to keep tariffs in force regardless of what happens at the high court, and elsewhere insisted the US is now “wide awake” on the need to restructure and de-risk supply chains.
Europe, meanwhile, got closer to saying Uncle this week, as the Dutch government suggested it’s ready to relinquish its control of local assets of Chinese chipmaker Nexperia (which the state seized several weeks ago amid disputes with China), provided China resumes shipments of critical chips to the Netherlands.
Despite the ever-expanding black box of global trade policy, shipping giant Maersk posted above consensus earnings and raised its outlook, with the company’s CEO indicating global trade is holding in well and “the integration of economies is growing.”
As the administration continues to focus on ringfencing China, its domestic policy continues to be hamstrung by the ongoing government shutdown, which this week became the longest such episode on record. As of Friday evening, Democrats and Republicans have remained unable to agree on a path to resolution.
White House economic adviser and Fed Chair shortlist nominee Kevin Hassett conceded this week that the shutdown’s impact has been “far worse” than expected, and its effects will likely be evident in fourth quarter GDP figures.
The latest Challenger hiring / firing data for October seemed to validate that viewpoint, as job cuts soared both M/M and Y/Y, with particular pain in the technology sector.
Perhaps unsurprisingly, the latest University of Michigan consumer sentiment update aligned with these data points, as the reading is now hovering right above its lowest level on record.
That said, ADP private payrolls data came in ahead of expectations following a down month in October, the latest GDP Now forecast points to 4% growth for Q3, and the latest Services PMI reading came in above consensus.
FHFA Director Bill Pulte, undeterred by the shutdown and not content to let Lutnick and Bessent have all the fun, said this week that federally-administered mortgage giants Fannie Mae and Freddie Mac are now seeking ways to take stakes in tech companies.
In a stroke of fortuitous timing, frontier model juggernaut OpenAI floated the idea of securing a federal backstop for its infrastructure investments at a conference this week, and we can only assume preliminary talks between Pulte and Sam Altman are ongoing.
The company later clarified it is not seeking any federal funding or guarantees, though a hypothetical cynical observer (certainly not us) might posit that this looks a bit like a classic trial balloon.
Avowed Democratic Socialist (that’s “Communist,” for those who didn’t get the memo on the sexy rebrand) Zohran Mamdani was elected mayor of New York City. Much can and should be said about the ostensible bastion of free market capitalism being run by a fan of the Soviet grocery store model, but it’s worth considering what this election says about the increasingly K-shaped economic outcomes that are the inevitable result of a fiat monetary framework.
The ongoing overhang of the government shutdown led to a turbulent week for equities, as the Nasdaq posted its worst week since Liberation Day. Bitcoin was not spared from the selling pressure, breaking below the $100,000 level for the first time since June before stabilizing back above the threshold to close out the week.
It may be weapons-grade copium, but it’s worth noting that bitcoin has continued to hold on to the ~$2 trillion market cap level for months while absorbing a significant level of overall selling pressure, including an historic revival of coins held for multiple cycles.
Meanwhile, institutional 13F filings seem to still point largely in one direction, as JP Morgan’s latest update reported a 64% increase in aggregate IBIT holdings across its asset management divisions in the third quarter.
Regulatory Update
President Trump emphasized his continued desire to be “number one in crypto” on a 60 Minutes interview over the weekend, while reiterating later in a stump speech that he wants the US to be the world’s “bitcoin superpower.”
Wyoming Senator Cynthia Lummis indicated this week that the Treasury Department is “looking at other ideas” to build the Strategic Bitcoin Reserve beyond converting gold holdings to bitcoin, while suggesting she is “glad that [Trump and Bessent] are embracing the notion” of a bitcoin reserve.
Samourai Wallet Co-Founder Keonne Rodriguez was sentenced to 5 years in prison, the maximum sentence allowed by his plea agreement.
Noteworthy
Several “DeFi” projects suffered major loss events this week, as Ethereum-based Balancer was exploited for $130 million while the Stream Finance protocol froze withdrawals following an unexplained $93 million loss.
Those with a penchant for gambling can now place bets on the potential activation of BIP-444, a controversial new “temporary soft fork” proposal focused on the use of bitcoin for arbitrary data.
Travel
Labitconf, Nov 7-8
Nashville Bitdevs, Nov 11
Austin Bitdevs, Nov 20