From last Friday, bitcoin has moved lower, around -4% in total as of this Friday morning. U.S. equities closed lower every trading day so far this week, driven by rising oil prices, rising U.S. bond yields, and rising conflict in the Middle East.
The longer term outlook for bitcoin remains constructive. Bitcoin has reclaimed its 20, 50, and 200-week exponential moving averages, something that historically hasn’t been followed by new cycle lows. It also printed its first golden cross since May 2025, although Benjamin Cowen cautioned that these often precede corrections.
The 90-day correlation between bitcoin and gold is also approaching its 2020 record. Like yellow gold, digital gold is benefiting from the debasement narrative.
The geopolitical and macroeconomic risks addressed in last week’s newsletter appear to be nudging closer to the downside. Kinetic conflict in the Middle East increased this week, putting pressure on energy markets.
Reports of a possible Houthi pipeline attack, involving at least three drone strikes, put the Middle East back in focus. Qatar, which supplied roughly a fifth of global LNG before the war, is reportedly in talks to buy U.S. LNG. That’s a striking example of the degree of disruption. Diesel is rising, which matters to a lot of the real economy.
The other previously mentioned downside risk centered on the U.S. Treasury’s recent activities. Treasury Secretary Bessent coordinated with Japan to address the weakening yen, and he also has been quite active addressing the rise of long-duration bond yields.
The week started well for Secretary Bessent. The yen pushed up into the key 160 USD/JPY level before being brought down to as low as 153. “I am the house now,” proclaimed Secretary Bessent, perhaps flushed with victory. Brad Setser, who in August publicly suggested the yen was more likely to trade through 155 than 165, argued that the strengthening yen benefits both Japan and the U.S., and that coordination is working as intended.
The week began to turn for Secretary Bessent when the 10-year yield reached 4.96%. The Treasury announced increased buybacks, which had little effect on the long end. The usual panicans melted down about the increase in yields. Luckily there were plenty of cooler heads, some of whom dunked on all the Chicken Littles. Worst bond meltdown ever.
For those wanting a deeper understanding of what’s happening in the bond market, Michael Green’s recent podcast appearance is a mandatory listen. There are too many gems from the podcast to share, but here’s one addressing the widely misunderstood increases in Treasury buybacks that spurred Mr. Druckenmiller to enlist AI to write an op-ed for the Wall Street Journal:
“If you as a household were given the opportunity to consolidate your credit card debt into the lowest interest rate debt that you possibly could, you would be foolish not to do so… That’s all Scott’s doing.”
Mr. Green also pointed out that this isn’t a problem unique to the U.S. Every major country is experiencing higher yields on the long end. Profligate government spending isn’t exclusively American, as Michael Every illustrates with examples from Europe, Japan, and China.
Speaking of government spending, Bessent said an announcement on automatic enrollment in Trump accounts is coming soon. President Trump separately floated $5,000 for every American adult if Republicans win the midterms. This reeks of trolling, but somehow the suggestion garnered the desired moral outrage and lamentations about hyperinflation.
You can certainly tell we’re in a bull market, because inactive OGs might be back and mainstream celebrities are shilling coins. But also because despite plenty of consequential geopolitical and macroeconomic news, there were plenty of riveting stories within crypto.
Robinhood Chain has cooled off a bit from last week. The high of $3 billion in daily volume last Friday was the peak, but it still generated around 1.9 billion on Thursday. Arkham spotted Wintermute buying PONS last Saturday, at what proved to be the ATH for the coin. As of Friday morning, PONS is down more than 30%.
Ansem and Threadguy think RWA memecoins will have a pronounced effect on tradfi. As in, memecoins will move tradfi equities. Ryan Watkins disagrees. It would take some major liquidity movements for the KOLs to be right.
Tradfi companies are certainly having an effect on crypto ones. Robinhood took a minority stake in Crypto.com, and Nasdaq invested in Kraken’s parent at a $21 billion valuation. James Seyffart posted a list of HYPE ETF holders, which includes multiple banks, asset managers, and trading firms like Jane Street and Bank of Montreal.
The Metaplanet controversy mentioned last week continued with an X article explaining the grievances well. More people voiced their shock and disappointment at the situation and how it’s being handled.
Hunter Biden’s memecoin was announced. It elicited heaps of outrage from KOLs before failing spectacularly. Aside from the hypocritical overreaction by KOLs who had been flooding CT (Crypto Twitter) with their own memecoin shills, the most interesting part of the sordid yet stale celeb memecoin launch was Cobie dealing with uninformed people. He found himself explaining that launching on a permissionless chain does not mean Coinbase partnered with the project or knew about the launch.
Remember, memecoins are dominated by insiders (there are too many examples every week to include), and almost no one else makes money.
Luckily, there were non-scams that did well this week, chief among them Venice’s VVV, which printed new all-time highs on Tuesday. The rally was precipitated by a dramatic mess in AI. OpenAI announced a major mathematical breakthrough, while mathematician Tristan Buckmaster alleged that work from private Codex sessions might have been used. Sebastien Bubeck responded, and OpenAI’s September 10 update said its investigation ruled out influence from Buckmaster’s recent Codex prompts, although it did note model training could’ve included some of that data.
The reactions and further commentary understandably led to people seeing the value of private AI. Erik Voorhees capitalized on the controversy, as you do.
While on the topic of AI, CNBC coverage highlighted XTAO, a Bittensor treasury company launching on Canada’s public market. Algod’s plan is to hold TAO, NOCK, subnets 10, 11, and 53, then wait patiently. David Sacks accused Vitalik Buterin of funding opposition to AI data centers.
Elsewhere, a critique of Zcash, seconded by Dankrad Feist, centered on its developer fund. HIP-4 prediction markets are coming online, and Trade.xyz launched Events. Competition with Polymarket and Kalshi is welcome, particularly if it pressures fees.
Finally, let’s talk about security. Liquid Network reported roughly 4,000 BTC withdrawn from its federation wallet by supposed white hats. About 3,400 BTC were reportedly returned, with roughly 600 retained.
Trezor suffered yet another hack. This time at its third-party email service, allowing phishing messages to come from its own domain.
Boldleonidas said goodbye to self-custody after a newly created wallet was drained. Marc Zeller responded by laying out a thorough but laughably complicated security protocol that all but the most crypto native would find unworkable. For most, self-custody is simply unsafe.
A 22-year-old Singaporean pleaded guilty in the $245 million crypto-theft case that ZachXBT helped expose.
Then there is the horrific report about the murder of Jonathan Melendez, his pregnant wife, their three-year-old daughter and their nanny in Mexico, in a suspected attempt to steal Bitcoin.
Stay safe out there.
-David Sencil