Ten31 Timestamp 908,247

Is everyone tired of all the winning yet? The summer doldrums might have lulled the market into a false sense of melt-up security, but this week shattered investors out of their stupor with a barrage of vintage Trump headlines including: several Artful Deals (with many blank spaces for details yet to be filled in); some eleventh hours trade war escalations; a surprisingly hawkish FOMC update; and a summary dismissal of the head of the Bureau of Labor Statistics on the grounds of not making up the right numbers. As the President made volatility great again this week, his mortal enemy Jerome Powell took a firmer than expected stance on the near-term path of benchmark interest rates, suggesting that there’s actually a case for the Federal Reserve to raise rates near-term, even as the latest labor market data released a couple days afterward that seemed to contradict that view. Predictably, Powell’s comments were shortly followed by the standard helping of Presidential ad hominem attacks on the Fed Chairman, but we thought the more telling response was Treasury Secretary Scott Bessent’s exhortation for the central bank to “embrace the Greenspan model,” the famously accommodative monetary reaction function that gave rise to modern quantitative easing. With Fed Governor Adriana Kugler suddenly announcing her resignation Friday afternoon, the administration may soon have an opening to appoint a mouthpiece to push for exactly this, possibly fulfilling the “shadow Fed Chair” plan Bessent floated before the election. Whatever the near-term path of macro headlines, we continue to believe the “run it hot and pin yields” strategy is still firmly on the table (and really the only politically viable option) and will create a favorable environment for hard assets over the next 12-24 months.

Portfolio Company Spotlight

Fold is a leading financial services platform providing the most comprehensive bitcoin-denominated consumer rewards programs and a suite of services bridging bitcoin and traditional financial rails. Fold offers debit cards that accrue cash-back rewards in bitcoin that can be withdrawn to customer-controlled wallets, on top of unified checking and bitcoin custody accounts allowing users to seamlessly combine their USD and bitcoin activities to better preserve and grow their wealth. Fold has an exciting product pipeline – including a credit card set to be launched in the near term – and recently completed its public listing with 1,500 bitcoin on its balance sheet, giving the company one of the largest corporate bitcoin treasuries in the world.

As the world’s largest investor focused entirely on bitcoin, Ten31 has deployed $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

Fold announced a major new partnership with payments giant Blackhawk to roll out Fold’s bitcoin gift cards to 400,000+ retail endpoints nationwide:

Strike rolled out its bitcoin-backed lending product for Colorado:

Strike also added a new mobile widget for users to track outstanding loans:

AnchorWatch completed its SOC2 Type 1 security audit:

Media

Strike CEO Jack Mallers appeared on Bloomberg to discuss recent trends in bitcoin price action and Twenty One Capital’s bitcoin acquisition strategy.

Zaprite Head of Business Development and Ten31 Advisor Parker Lewis joined Marty Bent for a new podcast series on the intersection of bitcoin mining and energy production.

Market Updates

President Trump’s camp kicked off the week by announcing a massive trade deal with the European Union that will levy 15% tariffs on most of the EU’s exports while requiring the Europeans to purchase $750 billion of American energy products and invest $600 billion in the US.

The deal, which seems remarkably skewed in favor of the US, has received significant pushback from the local press, but was of course immediately hailed as a massive trade win by the Trump administration.¹

Shortly thereafter, the US announced another major deal with South Korea which is also set to include direct investment pledges similar to the arrangements with Europe and Japan.

All those large investment pledges may come with some minor caveats, however, as Japan’s lead trade negotiator indicated this week that only 1-2% of the $550 billion headline figure from the country’s deal with the US will be in the form of direct investment, and the balance will be provided as loans at prevailing market rates.

As Trump cut deals with several major counterparties, the deadline for the potentially all-important deal with China was kicked out by another 90 days, though Treasury Secretary Bessent suggested talks have been “robust” and the US “has the makings of a deal” ready.

While the week started off with a flurry of positive trade news, President Trump returned to a much more hostile stance a few days later, noting that the baseline tariff for most countries will likely move up from 10% to 15-20%, instituting a new 50% tariff on copper imports, and boosting punitive tariffs on transshipments to 40%.

Finally, on Thursday night, the President unexpectedly announced a long list of updated, much higher tariffs on a variety of trading partners, rattling equity indices in overnight trading.

But look on the bright side – all this tariff winning has made room for a new iteration of helicopter money, as Senator Josh Hawley formally introduced a new “tariff rebate” bill that would send $600 to almost every American.

Meanwhile, GDP figures for Q2 came in very hot at +3%, well above expectations, a potentially surprising report given the initiation of tariff frictions at the start of the quarter.

On the flipside, the latest jobs numbers came in very weak on Friday, as Non-Farm Payrolls badly missed expectations.

More notably, the latest report also included significant downward revisions to strong numbers from the prior two months that collectively make the post-tariff environment look much less resilient. The updated numbers mark the largest negative revision since 2020.

The latest unemployment rate came in at 4.2%, in line with consensus but steadily ticking higher when accounting for the impact of lower immigration levels on the labor force participation rate.

Apparently incensed by the BLS doing exactly what it has been doing for the past ~5 years, President Trump responded to the revision by immediately firing the head of the department.

At the same time, the latest US manufacturing PMI reading posted another contraction reading for the fifth consecutive month, even as the prices paid reading remained very elevated.

On the back of all these softer updates, the 10-year US Treasury yield took its biggest single day plunge in months, dropping ~15bps on Friday as traders rotated out of risk assets.

All of those headlines created a somewhat awkward backdrop for the latest Federal Reserve rate decision, as the FOMC once again chose to hold its benchmark rate steady given ostensibly “solid” labor market conditions. Notably, though, the meeting saw two Fed governors – Michelle Bowman and Christopher Waller – dissent from the decision for the first time since 1993.

In his speech to reporters following the announcement, Fed Chairman Jerome Powell struck a hesitant tone on near-term rate cuts, and even noted that the central bank may actually be under-reacting to the data by not raising rates at this time.

Right on schedule, President Trump took to Truth Social to call Powell every name in the book and suggested the Fed’s Board of Governors “should assume control” if Powell won’t play ball.

Arguably the more interesting response to Powell’s speech came from Treasury Secretary Scott Bessent, who suggested the Fed should have some imagination and “embrace the Greenspan model,” which 90s kids will remember fondly as the foundation for Quantitative Easing (just don’t ask about what happened after 2006).

In an interestingly timed decision, Fed Governor Adriana Kugler announced her resignation from the central bank on the following day, potentially opening up an avenue for the administration to appoint a more “imaginative” voice at the Fed.

Bessent’s Treasury Department announced their expected borrowing for the third quarter this week, suggesting they’ll need to bring in just over $1 trillion (with a “T”) in Q3, more than $450 billion above previously issued guidance.

To be fair, this increase is largely related to refilling the TGA after working it down during recent debt ceiling negotiations; excluding that impact, this projection is “only” $60 billion above prior expectations. However, it’s also worth noting this figure also takes into account higher expected revenues from tariffs, so we’re still coming in well north of expectations even with that benefit.

The latest Treasury updates also suggested the borrowing mix will continue to shift incrementally (though perhaps not as aggressively as some expected) toward front-end issuance and that the buybacks program will continue to grow.

¹ Free tip for any polity seeking to avoid becoming a US vassal state: do not spend 40 years undermining domestic energy independence and erecting a singularly hostile corporate regulatory environment.

Regulatory Update

The developers behind Samourai Wallet struck a plea agreement with the government this week that will result in a maximum prison sentence of five years. The defendants will plead guilty to charges of unlicensed money transmission, while money laundering charges will be dropped.

Meanwhile, the DOJ’s trial of Tornado Cash developer Roman Storm, which could have similar implications for non-custodial privacy software in the US, entered jury deliberation this week.

Following supportive comments from FHFA head Bill Pulte last month, Senator Cynthia Lummis introduced a bill to formally require Fannie Mae and Freddie Mac to consider bitcoin in the mortgage underwriting process.

After much speculation and anticipation since the launch of spot bitcoin ETFs back in January 2024, the SEC approved in-kind creation and redemption for authorized participants making markets in the ETFs.

The White House’s digital assets task force released its summary policy report this week. The lengthy memo largely reiterates key points of March’s digital assets executive order, and a helpful summary of its key productive and less encouraging recommendations can be found here.

The report adds minimal new detail on the government’s plans for additional bitcoin acquisition to build the Strategic Bitcoin Reserve, but it does specifically label bitcoin a “reserve asset” and acknowledges that the Treasury and Commerce Departments are studying ways to acquire more bitcoin – while specifically the notion of “stacking sats”, a term coined by Ten31 Managing Partner Matt Odell.

Shortly after the release of the memo, White House digital assets advisor Bo Hines reiterated that the government is still focused on finding ways to accumulate “as much bitcoin as possible.”

However, in an unfortunate and concerning illustration of Woods’ Third Law of Politics, the memo includes a recommendation to expand government surveillance programs and censorship powers, ostensibly in the name of combating “illicit finance” facilitated by bitcoin and other digital assets.

In a similar vein, the “Online Safety Act” went into effect in the UK this week, requiring those located in the country to perform onerous age and identity verification requirements to access many online platforms, a trend we expect to become more common and which highlights the value of tools like Nostr.

SEC Commissioner Paul Atkins gave a speech this week promoting the value of “blockchain technologies” for revolutionizing traditional financial markets. While we appreciate the somewhat more friendly tenor of the current administration, we do look forward to the day when we can move past the Eternal September of trying to put centralized, permissioned records “on the blockchain.”

Noteworthy

Hedge fund magnate and Long Term Debt Cycle Enthusiast Ray Dalio has continued to warm more and more to bitcoin over the past few years, noting this week that investors should allocate up to 15% of their portfolios to gold and bitcoin (though he still “strongly prefers” the yellow metal to the orange coin).

Coinbase announced a partnership with JP Morgan to enable some crypto trading features and Chase rewards conversions directly within the Chase app.

Jack Dorsey’s bluetooth / meshnet chat tool Bitchat is now available on the iOS app store.

Blockstream launched Simplicity, a new smart contract language designed for bitcoin, on its Liquid Network sidechain.

Leading bitcoin mining ASIC manufacturer Bitmain – founded and domiciled in China – is reportedly planning to stand up production capacity in the US later this year.

Travel

• Bitcoin Park Imagine IF Summit, Sep 19-20
• Portfolio Company Retreat, early October