Is bitcoin benefiting from debt concerns?
Bad news isn't bringing bitcoin down for now. This is remarkable in a market lacking clear catalysts. Perhaps this relative strength stems from an old acquaintance: concerns about national debt and inflation. Within the sector, a completely different battle is underway: a race between attackers and defenders armed with AI models. Read more about this in this edition of Bitvavoās Market News.
Market update
Bitcoin is holding up remarkably well above ā¬ 50,000. That is not a given. Capital flows to US bitcoin funds have dried up, doubts surround Strategy, and interest rates on government bonds are rising. Even so, a fresh wave of selling has yet to materialize. Bad news seems to have less impact on the price than earlier in this bear market.
A new theme may be emerging: the sustainability of national debts, with the United States' debt at the forefront. The Telegraph warned this week that Washington isĀ becoming increasingly vulnerable to higher interest rates. A growing share of American debt consists of short-term government bonds. As a result, interest rate hikes have a relatively quick impact on the government's already high interest burden.
At the same time, inflation remains a source of concern. Normally, it is curbed with interest rate increases, but that tool is unattractive given a government budget that is spiraling out of control. The deficit remains large, and the US has to keep issuing new debt on a large scale. This reduces the central bank's room for maneuvre and again raises questions about the sustainability of the financial system.
This same discussion could become relevant for bitcoin. The market currently lacks a clear catalyst for its next move upward. Concerns about national debt, inflation, and the room central banks have to act could once again draw attention to bitcoin as a scarce alternative outside the traditional financial system.
Chart: investors are demanding more compensation to finance the US government
Featured
Crypto companies need the strongest AI models
Dozens of companies and organizations from the crypto world want major AI labs toĀ give them access to their most powerful models. They are asking out of self-preservation. Hackers increasingly have access to advanced AI, while those protecting billions in crypto assets have to make do with toothless AI models.
The appeal is included in the open letterĀ Defenders need the frontier, an initiative of the Bitcoin Policy Institute. Signatories include ARK Invest, Block, BitGo, and various organizations that fund open-source developers.
Large tech companies sometimes already get access to AI models that are not yet publicly available. ThroughĀ Project Glasswing, for example, Anthropic grants selected organizations access to its powerful Mythos model to scan software for vulnerabilities. OpenAI has opened a similar program withĀ Daybreak.
Many smaller open-source projects fall outside such programs. Take Bitcoin Core, the decentralized group of developers who maintain the Bitcoin network's core software. They must use publicly available AI models, which safety filters render unusable for both offensive and defensive tasks. Hackers, naturally, do not adhere to such restrictions.
After the recent Coldcard hack, the Bitcoin Red Team was formed, a group of sixteen volunteers who used AI to audit bitcoin software. In just over 24 hours, the team examined 390 projects. This turned up almostĀ 5,000 potential vulnerabilities, 85 of which were initially classified as critical. Many findings still need further verification.
One discovery had an immediate result. The team found a critical vulnerability in BTCPay Server, software that lets online stores process bitcoin payments themselves. Attackers, it turned out, were already exploiting it.
The signatories of the letter are asking for more than just access to better models. They also want computing budget, secure testing environments, and a direct line to the AI labs. AI makes it cheaper and faster to examine thousands of lines of code for weaknesses. The only question is who gets that capability first: the attacker or the defender.
In other news
Bitcoin miners also trying to cash in on AI's hunger for capital. The former Bitfarms, now Keel,Ā is halting mining in the US and has sold over a thousand BTC to finance a transition to an AI data center. Riot reportedly signedĀ a twenty-year leaseĀ with Anthropic worth $9.1 billion. And Mara pledged 18,750 BTC as collateral for a multi-million-dollar loan to develop "new business models". The shift is understandable: AI companies pay high prices for data center contracts, while bitcoin mining is becoming unprofitable for more and more miners.
Strategy sells bitcoin to restore confidence in its financial engine. Last week, the company sold 1,690 BTC and issued new MSTR shares. With the proceeds, it added $650 million to its dollar reserve and bought back $109 million worth of Stretch shares. Strategy can now cover its dividend obligations for almost three years. On television, CEO Phong Le promised the company wouldĀ start buying again later this year. First, restoring the STRC price is the priority. There is work to be done: the share is still trading 5.5% below its $100 target.
Tether completed its first full financial audit. KPMG's US branch issued an unqualified opinion on the 2025 finance statements of Tether's entity in El Salvador, the issuer of USDT. ThatĀ is a milestone, because a real audit has been the market's unfulfilled wish for years. Still, there is an awkward catch: Tether is publishing neither the financial statements nor the declaration itself. The audit was also carried out under a standard less stringent than what the GENIUS Act requires. In other words, Tether is seeking legitimacy, but still on its own terms.
CLARITY Act gets a chance in the Senate in September. On Tuesday, September 15, weĀ should find out whether the bill actually comes to a vote. The market puts the odds of this very low. On Friday, Galaxy revised its estimate down toĀ just 10%, citing unresolved disagreements as the main reason. There is also very little time left before preparations for the midterm elections begin. The administration, regulators, and major market players appear to be preparing for a stalled bill. They willĀ meet at the White House this week, presumably to discuss what can be arranged outside the legislative process.
Satoshi Radio: InĀ the latest episode of Satoshi Radio, the bear market makes itself felt in all sorts of places. Telling, for example, was the mood in the room when Samsung announced its stablecoin plans. Several altcoins ran into trouble. There's also attention on bitcoin miners, who are broadening their activities out of sheer necessity. Finally, Strategy comes up, whose CEO was confronted with a sensitive question on television: When are you going to buy bitcoin again?
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.