Despite ostensibly strong macro indicators through the week – including a GDP print well above expectations, core PCE in line with consensus, and a W/W retreat in US Treasury yields – equities traded poorly, with the S&P entering a 10%+ correction for the first time since October 2022. Meanwhile, bitcoin put up another strong showing, gaining another ~15% after last week’s +10% move (which also coincided with a broad selloff in traditional markets). While it’s far too early to call a “bitcoin decoupling,” we’re once again encouraged by bitcoin’s ongoing resilience in the face of heightened anxiety among investors, particularly coming off a year of very public meltdowns and fraud revelations in the adjacent “crypto” space. Even more importantly, this week exhibited a continued robust pace of innovation from the companies in our portfolio, including exciting new releases from Cathedra, Mutiny, and Coinkite. All Ten31 portfolio companies have remained obsessively focused on iterating and developing regardless of macro noise and bitcoin’s price action, and we expect this to pay significant dividends into bitcoin’s next bull cycle. 

Portfolio Company Spotlight

Mutiny Wallet is a self-custodial lightning wallet combining privacy best practices built in by default with accessibility for new bitcoiners. The wallet leverages BDK and LDK to offer a unique web-first design, functioning as a progressive web app (PWA) capable of running on virtually any smartphone without the need for downloading from a third-party app store, which enhances both new user onboarding (particularly in emerging markets) and censorship resistance. The team – composed of lightning veterans Tony Giorgio, Ben Carman, and Paul Miller – is also working on a variety of new features including a next-generation node implementation tailored to Mutiny Wallet, a dedicated lightning service provider (LSP), various forward-thinking Nostr integrations (the latest of which was announced this week), built-in Coinswap functionality, DLC applications, and more. 

Selected Portfolio News

Cathedra launched CathedraOS, a new custom bitcoin mining firmware intended to optimize machine efficiency:

Mutiny launched “Auto-Zaps,” a new feature leveraging Nostr to enable subscription-like experiences with lightning payments:

Coinkite released a new Coldcard edge firmware with experimental features for advanced users:

Media

Cathedra published an in-depth overview of the development and potential applications of the company’s new mining firmware. 

Cathedra CEO AJ Scalia and COO Drew Armstrong joined the TFTC podcast with Ten31 Managing Partner Marty Bent to discuss the company’s new firmware and the future of the mining industry. 

Ten31 Advisor Parker Lewis gave a talk on inflation and bitcoin’s path to monetization. 

StatMuse published the latest edition of its Muse Letter. 

Hodl Hodl’s peer-to-peer bitcoin-collateralized lending platform was featured in a new tutorial by popular bitcoin educator BTC Sessions. 

Market Updates

The US 10-year Treasury yield broke 5% again to kick off the week, but quickly retraced to just shy of that bound and hovered in that range all week. 

Despite the more muted moves in the US bond market this week, stock indices continued to sell off, with the S&P entering correction territory. 

US GDP for the third quarter came in at +4.9%, well above growth for the first half of the year and ahead of consensus expectations. That said, the details underlying the headline paint a less rosy picture. 

Core PCE – the Fed’s preferred metric for measuring price inflation – was up 0.3% M/M or 3.7% Y/Y  in September, in line with expectations. 

However, the latest reading for consumer inflation expectations ticked back up sharply. Meanwhile, the Housing Affordability Index hit yet another fresh record low. 

Ford and the UAW reached a tentative agreement that would end the union’s six-week-long strike. The deal would include hefty pay increases for union members, the latest such agreement to put more upward pressure on wages for a large group of workers.

US regional banks reported ongoing challenges during Q3 earnings season, as net interest margins have continued to see pressure on both sides from higher rates. Bank stocks broadly traded down to their lowest levels since early May and are now well under the lows seen during the height of this spring’s banking crisis. 

After 10 consecutive rate hikes, the European Central Bank held its benchmark interest rate steady at 4% this week, while signaling a likely end to further hikes barring a new inflation shock. 

Elsewhere overseas, more signs of stress in China’s economy hit the wire, most notably large embattled property developer Country Garden defaulting on its dollar-denominated bonds for the first time. As of this week, $125 billion of China’s $175 billion property-linked dollar bonds (over 70%) are in default. 

New construction in China is on pace for far and away its lowest level since 2009. In response to this ongoing deterioration of the country’s real estate sector, the Chinese government this week approved a large infrastructure spending bill supported by substantial new sovereign debt issuance. 

Regulatory Update

Earlier this month, the Wall Street Journal ran a misleading article suggesting terrorist group Hamas had amassed significant funding through bitcoin and other cryptocurrencies, prompting a group of Senators and Congressmen led by Elizabeth Warren to petition the Treasury Department for new rules to “curtail illicit crypto activity,” a likely motivation for the overly broad proposal from FinCEN at the end of last week. 

Blockchain surveillance firm Elliptic – upon whose data the claims in the Wall Street Journal article were based – published a response to the situation this week indicating the data were indeed being misrepresented by journalists and politicians. On Friday afternoon, the paper issued a tepid correction. 

Pulling back, this situation presents an opportunity to again consider the black box methodology and questionable accuracy of the processes used by blockchain surveillance platforms.  

The UK passed a bill giving law enforcement authority to freeze or confiscate suspected criminals’ bitcoin or other cryptocurrencies prior to conviction. 

The New York Attorney General filed a complaint against Digital Currency Group (and DCG head Barry Silbert), Genesis (and former Genesis CEO Michael Moro), and Gemini related to the $1 billion shortfall incurred by the parties as part of Gemini’s Earn program. 

Noteworthy

Elon Musk – who has previously acknowledged his goal of turning Twitter into a “WeChat for the West” and has ramped up KYC and identity verification requirements since buying the site – this week suggested he wanted “X” to become tied to users’ “entire financial life,” once again underscoring the importance of permissionless money and communication protocols like bitcoin and Nostr. 

Ledger announced the launch of its new “Recover” service (despite the program arousing significant controversy earlier this year due to its security and privacy trade-offs). 

OpenSats announced new long-term support for security researcher and developer Matt Morehouse.  

Travel

• Nashville Bitdevs, November 7
• Nostrville @ Bitcoin Park, November 8-10
• Ten31 Tribe Event @ Bitcoin Park with Primal founder Miljan Braticevic and Mutiny co-founder Tony Giorgio, November 8 
• Austin BitDevs, November 16

Originally published on Ten31 Timestamp