Ten31 Timestamp 839,027
It was an awkward week for the many pundits and economists that spent last fall hanging the “Mission Accomplished” banner in the war on inflation, as the closely-watched CPI reading for March came in above expectations and showed a clear reacceleration of annual price increases across most categories. Benchmark yields spiked higher as traders immediately kicked back expectations for any near-term rate cuts by the Fed, with the 10-year experiencing its worst day since the onset of the COVID crisis four years ago. The backdrop was not helped by a very weak 10-year auction, ongoing federal deficit spending at levels set to overshoot CBO projections by ~50% this year, and growing jitters around Middle East tensions that have pushed broad commodity prices near post-2008 highs. As markets aggressively reprice expectations for near-term changes to monetary policy set at the opaque discretion of a tiny cabal of the same pundits and economists that celebrated the death of inflation a few months ago, bitcoin just passed block 839,000, meaning the network is now less than 1,000 blocks away from the next programmatic change to its predetermined, predictable, and consensus-enforced monetary policy…
Ten31 Timestamp 837,980
The week was marked with much stronger than expected macro headlines across the board, with the latest ISM reading indicating manufacturing expansion for the first time since 2022, March Nonfarm Payrolls figures once again blowing out consensus, and the price of oil breaking $90/barrel for the first time since October. While a variety of data points under the hood suggested the health of this growth may be lacking, these updates – along with recent prints pointing to stubbornly high inflationary pressures – severely complicate the optics of the long-awaited Fed rate cuts that the market has been anticipating and seemed to take as a given just a few weeks ago. Right on cue, Jerome Powell and various Fed governors took to the financial airwaves throughout the week to jawbone down expectations for near-term easing in response to these macro updates. However, exploding federal deficits – despite unemployment <4% and the country experiencing a period of at least nominal peacetime – and a federal interest burden that appears to be going parabolic make sustained high rates on government debt (or even worse, further rate hikes floated by some Fed officials this week) seem like a virtual non-starter for the central bank, particularly given higher rates increasingly look stimulative.
his was an apt week for investors to grapple with the rock and hard place dilemma of potential fiscal dominance in the US, as Satoshi Nakamoto’s 49th birthday fell on April 5th, a date we can only assume was no accident and which harkens back to the last time the US experienced a prolonged period of fiscal dominance (though that decade was marked by both economic depression and a world war). As politicians and central bank governors confront historically high debt to GDP ratios and the undefeated opponent of compound interest, bitcoin continues to do exactly what it was designed to do and looks more compelling than ever as the network approaches its next programmatically determined block subsidy halving in just ~two weeks…
Ten31 Timestamp 837,023
The US stock market continued to advance to new all-time highs this week on a relative lack of meaningful macro updates, though the latest PCE data – released on Good Friday when markets were closed – pointed to some additional signs of relatively sticky price inflation. Fed Chairman Jerome Powell responded to the data on Friday by suggesting the central bank is in no hurry to loosen monetary policy, just one week after delighting traders everywhere with comments indicating the Fed is still on track to cut rates three times this year. Powell also noted that the economy doesn’t appear to be suffering from current rate levels, even as the Chicago PMI declined to troughs not seen since spring 2020, the often-cited Sahm Rule has now been triggered in 20 states, and federal deficits continue to run at levels only previously exhibited during recessions. Against that backdrop, bitcoin held in around the $70,000 level throughout the week – just above its all-time high from the 2021 cycle – as ETF inflows flipped back to positive following last week’s spike in GBTC outflows…
Ten31 Timestamp 835,918
The financial world held its breath once again this week for the bi-monthly ritual of a dozen central planners handing down their latest pronouncements on the global price of money. The world’s most powerful attorney Jerome Powell surprised many traders – who had been taking an increasingly bearish view of near-term rate cuts on the back of recent upward reversals in reported inflation metrics – with news that the Federal Reserve still expects three rate cuts this year, with a tapering of the central bank’s “Quantitative Tightening” program to begin soon. Markets reacted positively to the news and equity indices ripped to new all-time highs once again as investors assessed the prospect for easier monetary policy even in the face of headline inflation metrics that remain stuck well above the Fed’s nominal policy target, the latest data point in a string of updates pointing to increasing fiscal dominance in the US. As if right on cue, the US House of Representatives closed out the week by passing a $1.2 trillion omnibus bill to avoid the latest government shutdown with an incremental slug of federal debt to tack onto the existing $34.6 trillion pile (which is already up over $3 trillion since the last shutdown stalemate nine months ago).
Meanwhile, bitcoin’s price continued to cool this week as the spot bitcoin ETF complex flipped to net outflows for several days in a row, but total network hashrate continued to follow the path of parabolically global debt, as the metric reached 600 EH/s for the first time only a few months after first surpassing 500 EH/s. Despite the less favorable price action, the week brought several headlines indicating ongoing sovereign and institutional interest in bitcoin, including constructive announcements from Japan’s $1.5 trillion government pension fund and BlackRock’s Head of Digital Assets. Bitcoin doesn’t need official endorsement from any of these institutions to continue doing exactly what it was designed to do, but with monetary easing apparently getting closer despite entrenched inflation and global debt continuing to ramp with seemingly no ceiling, we expect both network hashrate and interest from legacy players to continue moving up and to the right this year and beyond...
Ten31 Timestamp 834,943
After months of virtually uninterrupted bullish price action, bitcoin broke its recent streak of weekly green candles this week, settling at roughly flat W/W as of this writing. Bitcoin ETFs continued to take on huge volumes and set another net inflows record of nearly $2.6 billion as investors weighed the unwelcome resurgence of reported price inflation metrics, as well as the upcoming tsunami of incremental federal debt issuance needed to fund the Biden Administration’s proposed budget for next year and the coming decade. Bitcoin closed the week roughly flat after pushing to almost $74,000, but is still hovering right around the prior cycle’s all-time high.
Discouragingly, it was also a bull market for the administrative state this week, with several adversarial headlines hitting the wire. A US court found Roman Sterlingov guilty on various counts related to his alleged operation of the custodial mixer Bitcoin Fog, despite numerous questionable details in the prosecution’s case; just as concerningly, the court ruled that data from Chainalysis used to convict Sterlingov was reliable despite substantial unanswered questions about the efficacy and verifiability of the company’s information, potentially setting a dangerous precedent for future court cases. Also this week, the US House passed a bill seeking to force either a sale or an outright ban of the TikTok app on national security grounds that seem to be merely a pretext for yet more expansion of the executive branch’s power to regulate online speech; meanwhile, the Biden Administration’s new budget contains a revival of the proposed 30% excise tax on US bitcoin miners’ energy consumption, though we expect this provision to be defeated as it was when originally proposed last year.
The Ten31 team, however, found many reasons for optimism this week in Austin, where our team participated in and led presentations at the PlebLab Startup Day and the SXSW Bitcoin Takeover at the Bitcoin Commons. The events were the latest reminder of how vibrant and robust the bitcoin ecosystem is, and it’s increasingly undeniable that the pace of development is accelerating across a variety of verticals from privacy software to payments technology to mining infrastructure. These technologies are all promising from an investment perspective, but more importantly, they will form a key pillar in preserving the liberties that we believe the vast majority of Americans regard as non-negotiable, and the founders behind them are not slowing down. Said another way: we’re going to win.
Ten31 Timestamp 833,904
Bitcoin briefly tapped new all-time highs twice this week before retracing to slightly lower levels in price action reminiscent of the last two times the asset was approaching a breakout. In both cases this week, bitcoin quickly erased intraday losses – including a sudden 12% wick down on Tuesday afternoon that was a distant memory less than 24 hours later – on the back of another week of record ETF inflows. On the whole, the ETFs acquired ~8x new daily bitcoin issuance through the week, pushing collective AUM for the new vehicles above GBTC’s total assets for the first time. Bitcoin’s latest +10% weekly candle was coupled with more volatility in the banking sector, as troubled regional bank New York Community Bancrop – the 28th largest bank in the US by assets – saw its stock plunge nearly 50% on Wednesday before the announcement of a $1 billion rescue package by a private consortium. The stock immediately pared losses on the positive news, but is still down substantially on the month and YTD as concerns on loan delinquency and the commercial real estate backdrop persist. Meanwhile, the FDIC’s latest quarterly report pointed to some improvement in unrealized securities losses on bank balance sheets, but also showed overall credit loss provisions and large bank commercial real estate loan delinquencies reaching ~13-year highs…
Ten31 Timestamp 832,835
The broader market got a small taste of what accelerating demand meeting perfectly inelastic supply looks like this week, as bitcoin blew past the $60,000 level for the first time in more than two years and ended February up ~$20,000, its largest monthly move in history. The post-ETF sell the news event was short-lived as volume and inflows into the new vehicles exploded and the ETF complex saw more activity in just a few days than in its entire first month of trading, driving net new money to new records even while absorbing substantial outflows from GBTC. During several days this week, the ETFs by themselves took in north of 12x bitcoin’s daily new issuance, and it bears remembering that this available new issuance will programmatically shrink by 50% in less than two months. This price action meant bitcoin carved out even more free real estate in the mainstream financial press this week, including a beleaguered Jim Cramer glumly pondering what bitcoin has ever done for the world.
This was, ironically, a question well worth asking during a week in which the banking system once again showed signs of fragility; President Biden looked to advance a plan to spend hundreds of billions of unilaterally frozen assets of a major sovereign nation; the New York Fed acknowledged long-term deterioration in US Treasury market liquidity; key inflation readings surged M/M; and the US national debt expanded at a pace that puts it on track to grow by $1 trillion every 100 days. If we ignore bitcoin’s unique and unprecedented elimination of counterparty risk in holding a globally saleable money; its resistance to adversarial actors bent on unilaterally enforcing preferred policy agendas through theft and censorship; its global 24/7 liquidity, 99.9% uptime, and trillions of dollars of permissionless annual settlement; its dramatic outperformance of every other asset class as a tool for savings and inflation protection; and its incorruptible scarcity in the face of parabolically growing and unserviceable sovereign debt levels…then we suppose we might have to agree with Cramer that bitcoin has never really done anything for humanity…
Ten31 Timestamp 831,825
It was a big week for the US stock market, as speculators held their breath in anticipation of the latest quarterly earnings report from GPU behemoth Nvidia, one of the few titanic companies holding markets aloft as equity indices have continued to make successive new all-time highs this year. Despite some severe jitters early in the week, bulls lived to fight another day as Nvidia posted blowout earnings that sent its already stratospheric market cap soaring past $2 trillion, surpassing the GDP of most countries on earth. While we’re bullish on the potential of AI and take no view on Nvidia’s valuation, this increasing reliance on a concentrated set of tech behemoths to serve as the de facto savings and retirement account for the developed world gives us pause and is the latest illustration of bitcoin’s potential as a unique, de-financializing force set to eat much of the store of value market.
It was an equally big week for scions of traditional finance objecting to that thesis. CNBC’s Andrew Ross Sorkin led the way by informing viewers that bitcoin cannot, in fact, be a good store of value as its price doesn’t stay the same over time (Sorkin was presumably thinking of famously stable stores of value including gold, the S&P 500, and real estate). Elsewhere, the European Central Bank took to Twitter once again to denigrate bitcoin as “costly, slow, and inconvenient,” an interesting argument given that bitcoin is already facilitating trillions of dollars of volume annually and doubling the total annualized transactions processed by Fedwire after just fifteen years of bootstrapping with no downtime, government support, or centralized direction. As savers and investors worldwide keep looking for better ways to outrun monetary dilution and the bitcoin network keeps trustlessly producing a new block every 10 minutes, we’re happy to continue taking the other side of the ECB’s bet…
Ten31 Timestamp 830,861
The broad-based bullishness of the past few months flatlined somewhat this week as multiple inflation prints came in hotter than expected while closely watched indicators like US retail sales also moved in the wrong direction. The benchmark US 10-year yield popped notably on the week and is now up ~50bps off YTD lows to ~4.3%, a level that has historically coincided with increased stress in financial markets including September 2022’s near-implosion of British pension funds, spring 2023’s banking crisis, and last October’s turbulence in the global bond complex. While the S&P and Nasdaq were down modestly on the week as investors digested a potentially longer path to central bank rate cuts, bitcoin ripped off another ~10% move up as net inflows to new spot ETFs accelerated to the tune of ~$2.5 billion. As price inflation proves stickier than hoped (even as measured by questionable official statistics), major pockets of traditional investment like commercial real estate continue to look more impaired, and central bankers worldwide say the quiet part out loud with growing frequency, we wouldn’t bet on this strong trend for interest in bitcoin reversing in the near term…
Ten31 Timestamp 829,843
The week was filled with noteworthy comments from the leading masters of the financial universe, as both Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen called out the unsustainability of the US’s current fiscal path and their concerns with the swiftly deteriorating commercial real estate backdrop that appears to be a growing source of stress for bank balance sheets. Both officials assured the public that any impact from losses in this lending segment would likely be contained, though Powell took the Ivan Drago stance in his highly-anticipated 60 Minutes interview, noting that some banks would probably end up failing on the back of this trend. Despite these foreboding comments, as well as the Fed Chairman’s suggestion that the Fed would likely move more slowly than hoped on rate cuts this year, investors still found reasons to be bullish as the S&P500 ran to yet another new all-time high and exceed the 5,000 level for the first time.
As central planners grew more concerned and the market partied like it was 1999, bitcoin took a 10% leg up on the week, closing in on new multi-year highs as ETF inflows remained strong and GBTC outflows appear to have abated for the time being. With the traditional financial system looking more precarious by the week, the halving approaching, institutional interest clearly growing, and ecosystem development moving faster than ever, we continue to think the 12-24 month outlook for bitcoin and the companies building on it is as bullish as it’s ever been…
Ten31 Timestamp 828,744
It was a busy few days for major macro indicators, but the latest overreach out of Washington stole the show this week for anyone paying attention to bitcoin. The Department of Energy released a new, ostensibly mandatory survey demanding granular, invasive data from a variety of mining operations around the US. The survey – which aims to collect information not required of virtually any other industry or power consumer – appears to lay the groundwork for expanded, unconstitutional bureaucratic surveillance of the US’s burgeoning mining industry, and potentially for even more sinister outcomes longer term. While the ongoing convergence of bitcoin mining with local grid infrastructure and the growing use of bitcoin mining as a means of methane capture from this country’s massive set of abandoned oil wells – all of which is being vigorously promoted by the local regulators and energy executives where this activity is ramping up – will serve as a bulwark against excessive federal discrimination against the mining industry, this new surveillance attempt bears monitoring, and we expect substantial opposition from stakeholders across the industry over the coming weeks. Meanwhile, bitcoin network hashrate and difficulty hit yet another all-time high.
As the US administrative state busied itself with the phantom “emergency” of computers performing hash functions with legally purchased electricity, potential signs of a more legitimate emergency appeared within the US banking system, as New York Community Bancorp (NYCB), the bank that absorbed the majority of Signature Bank’s balance sheet in the wake of last spring’s banking crisis, announced dismal Q4 results that pointed to substantial challenges in the bank’s commercial real estate loan portfolio, driving the bank’s stock down nearly 50%. This is a key trend we have been monitoring in the Timestamp for the better part of a year given skyrocketing vacancies, write downs on blue chip assets, and a wall of near-term maturities. With the Fed’s BTFP facility allegedly set to expire in March and many regional bank balance sheets still upside down, we continue to be cautious on the outlook for the legacy financial system and expect this instability to act as yet another lever to drive awareness and adoption of bitcoin’s value as absolutely scarce, counterparty-free money – or as the world’s largest asset manager would have it, the “flight to quality” trade…
Ten31 Timestamp 827,662
While this week was filled with the typical variety of macro headlines – including record federal interest payments that are set to balloon exponentially higher and the officially confirmed end of the BTFP program that has kept regional banks afloat over the past year – the key highlight for anyone paying attention to bitcoin was the letter Ten31 and 25 bitcoin companies submitted to FinCEN. We and our co-signers are proud to have spearheaded a push on behalf of the entire industry to call out and oppose the latest attempt at federal overreach that would negatively impact all Americans’ privacy and financial lives, and we encourage everyone to read the letter here…
Ten31 Timestamp 826,568
The Ten31 team spent most of the week at Nashville’s Bitcoin Park for the 2024 Energy and Mining Summit, where over 150 industry participants gathered to discuss all facets of the rapidly growing bitcoin mining ecosystem. Despite nationwide inclement weather, the Summit was packed with engaged participants from every corner of the industry and included high-signal contributions from public company leaders, innovators in mining technology, key regulators, and executives from the energy and power space (including representatives from many Ten31 portfolio companies). The event was appropriately timed given the cold snap that affected most of the country this week, as bitcoin mining curtailment and demand response programs once again helped to offset some of the electrical grid strain resulting from this weather in several parts of the country. This dynamic was not lost on many of the regulators and utility operators in attendance, and perhaps the key takeaway from the week was that mining is becoming more mainstream and only continuing to get more intertwined with energy and power production, a trend we expect to escalate over the next decade…
Ten31 Timestamp 825,629
After months of hype and several highly entertaining false starts, the SEC finally approved 11 spot bitcoin ETFs on Wednesday of this week – exactly 15 years after Hal Finney’s iconic “running bitcoin” tweet – with trading commencing the following day. While the dust has yet to settle on exactly how early flows will shake out and the market’s hysterics leading up to the approval were undoubtedly a sideshow, we do expect these vehicles will make it easier for traditional pools of capital to flow into bitcoin, with positive implications for bitcoin’s price over time. More importantly, though, these ETFs represent the latest piece of clear evidence of Ten31’s thesis that bitcoin is eating the world. After years of deriding bitcoin as not just uninteresting but even outright harmful, the leaders of the legacy financial system just spent the last several weeks in a sprint to not only secure approval for their bitcoin ETFs but also to outdo each other in extolling bitcoin’s unique virtues on mainstream news appearances. Most notably, Larry Fink, who just a few years ago called bitcoin an “index of money laundering,” took to multiple broadcasts to promote bitcoin as an “asset that protects you.”
While Larry clearly still doesn’t fully get it, this diametric shift in tone is emblematic of the fact that, sooner or later, every self-interested economic actor will have to embrace bitcoin. We expanded on the derivative implications of this reality in a longform piece out this week titled Bitcoin is Eating the World, where we walk through what growing mainstream acceptance of and interest in bitcoin means for the still highly underappreciated bitcoin infrastructure ecosystem. The ETFs are certainly a bullish milestone and signpost, but they are still just a very early indication of the wave of mainstream adoption we see coming over the next decade, and this wave will have seismic implications for early investors in bitcoin’s enabling technologies.
Ten31 Timestamp 824,619
Bitcoin celebrated 15 years since the mining of its genesis block this week – a period during which the permissionless, open source, distributed network has achieved 99.99% uptime – by breaking the $45,000 price level for the first time since April 2022 (a level last seen before the implosion of TerraLuna and the cascade of crypto collapses it triggered). Poetically, the US national debt also broke the $34 trillion mark this week, adding another $1 trillion in under three months and highlighting the accelerating fiscal instability that motivated bitcoin’s creation 15 years ago. This anniversary week was also marked by the filing of near-final documents for the launch of many long-awaited spot bitcoin ETFs, which could open up substantial new capital flows to bitcoin (a dynamic we expect to benefit our whole portfolio)…
Ten31 Timestamp 823,558
This year ended on a high note for traditional markets, with the S&P closing just below all-time highs and the classic 60/40 portfolio rebounding aggressively over the past two months as the market continued to price in more rate cuts for 2024 (as always, though, there is no second best). Meanwhile, the many legacy finance players chasing a spot bitcoin ETF issued new updates to their filings that suggest final approval of the vehicles could be close at hand. At the same time, new headlines from the week pointed to ongoing shifts away from the US dollar on the margin, continuing a trend we expect will have substantial implications for both the legacy financial system and bitcoin over the long term…
Ten31 Timestamp 822,575
The Santa Rally was in full force this week, as the S&P 500 climbed to new YTD highs and is now almost back at its all-time high as investors increasingly price in (correctly or incorrectly) peak restrictive monetary policy. As the Fed ostensibly prepares to cut rates during the coming year, the S&P now sits 9% above the level at which the Fed began hiking rates in early 2022, and basically in line with its all-time high in November 2021; at the same time, core PCE and CPI metrics still sit comfortably above 2021 levels (despite recent declines in their acceleration), all unmistakable signs of another job well done by central bankers. US policymakers continued to beclown themselves by sending a tirade to various “crypto” industry participants and advocacy groups scolding them for having the temerity to publicly disagree with new financial surveillance legislation from Senator Elizabeth Warren. Against the backdrop of ongoing regulatory finger-wagging, the bitcoin network reached yet another all-time high in total hashrate and difficulty, with hashrate eclipsing 500 EH/s for the first time (up ~2x from just a year ago)…
Ten31 Timestamp 821,632
It was a bull market for central planning headlines in this last week before the Christmas and New Year’s holidays. Markets rejoiced early as the Fed seemed to open up (albeit clumsily) to the possibility of near-term rate cuts heading into 2024, pushing stonks higher and yields lower – after this week, the benchmark 10-year Treasury yield has now declined over 100bps in just 6 weeks, more than retracing its violent upward spike from September and October…
Ten31 Timestamp 820,423
Traditional markets generally maintained gains from the past few weeks even as economic indicators continued to look mixed. While non-farm payrolls data for last month came in above expectations and the unemployment rate ticked down sequentially, the latest data for both job openings and US manufacturing continued their downward slides, with job openings looking particularly soft relative to expectations. Additionally, following last week’s report on unrealized bank balance sheet losses once again nearing all time highs, this week saw some additional evidence of growing bank stress, as use of the Fed’s BTFP facility – which is ostensibly scheduled to expire in March 2024 – increased by $9 billion W/W as small bank cash reserves continue to plummet even despite BTFP support. Meanwhile, bitcoin extended its recent run with another +13% gain on the week and is now up over 165% on the year. Notably, bitcoin has been able to put up this impressive move even as interest rates remain at or above 20+ year highs; while we take no view on near-term swings in bitcoin’s price, we think the recent strength in this kind of environment bodes well for a world where central banks may be ending their tightening cycles, investors may be seeking “flight to quality” trades, and blue-chip institutions are preparing to roll out new vehicles to access bitcoin…
Ten31 Timestamp 819,428
The upward whipsaw in traditional markets continued this week, as the S&P 500 made new YTD highs and bond yields continued their aggressive retracing of last month’s upward spike. The US 10 year yield, the world’s reserve asset, once again traded like an illiquid pre-mined altcoin, declining over 80bps in ~6 weeks after running up by about that same amount in the preceding 6 weeks. Despite the rally, new data out this week from the FDIC pointed to renewed pain on bank balance sheets, with unrealized losses on securities increasing more than 20% sequentially through Q3 and returning to the highs that touched off the collapse of SVB and several other major banks earlier this year. Among other metrics making new highs was bitcoin’s total network hashrate, which pushed close to 500 EH/s, nearly a 5x increase from the summer 2021 trough that followed China’s mining ban. With bitcoin’s price up well over 100% YTD, institutional and sovereign interest accelerating, and infrastructure to accommodate the next wave of adoption improving rapidly every week, we expect this trend to continue advancing up and to the right for the foreseeable future…