This editorial is from this week’s edition of the newsletter Week in Review, sent to subscribers on Friday. Subscribe to the newsletter to get this weekly editorial the second it’s finished. The newsletter also includes the biggest stories of the week, with a comment on each story.
Last Friday, Bitcoin dropped from $64.7K to $62.8K, but seven days later it ground its way back up to $64.8K like nothing ever happened. Not bad when taken in isolation. Unfortunately, comparison is the thief of joy. While Bitcoin puttered, U.S. stocks staged a risk-on rally as Trump called off Iran strikes (how many times now?) and oil fell. The Dow ripped past 54,000 for the first time ever, and the S&P reached an all-time high too at 7,737.
The macro story of the week was all about Japan. Japan will use the International Repo Facility to support the yen rather than sell U.S. Treasuries, a less destabilizing option. Japanese yields surged to start the week, leaving some unconvinced by the intervention. The Kobeissi Letter argued the carry trade is dying.
Joseph Wang thinks Treasury has spent all the ammunition in its Exchange Stabilization Fund. Mark Sobel disagrees, noting the ESF holds dollars and has many ways to mobilize its balance sheet. The yen’s weakness has led some to mistakenly call the Japanese government’s fiscal situation precarious. Brad Setser pointed out Japan is neither spending nor printing: one of the smallest fiscal deficits in the G-7 and a projected primary surplus this year.
Secretary Bessent directly attacked Nick Timiraos in response to his Wall Street Journal piece titled, “Why Bessent Is Leaning on the Fed to Help Prop Up Japan’s Currency.” Some cheered the burn; others found it dumb, and in line with this admin.
The most informative and useful post of the week concerning macro came from Lyn Alden, who has a useful list of recurring macro posts you can safely ignore.
In crypto, the biggest news was out of Washington, where CLARITY inched forward. On Monday, Eleanor Terrett reported the White House had not responded to the ethics counterproposal sent by Senators Tillis and Gallego. By midweek, reports circulated that President Trump had agreed to the ethics provision, which would put the onus squarely on Democrats.
In disappointing but not surprising news, the Wall Street Journal editorial board came out against CLARITY on the reasoning that small banks need protecting from stablecoin rewards they cannot compete with. Huh? Omid Malekan wrote a great rebuttal. More worrying for CLARITY is the observation that crypto’s allies might be leaving Washington en masse. Most worrying, Majority Leader John Thune delayed the CLARITY Act vote to September. Polymarket odds for a 2026 passage are at 14%.
Enough politics. In other depressing news, the Coldcard hack continued to unfold.
Galaxy’s Alex Thorn has been the most reliable tracker of the carnage, and by Sunday evening he was counting a likely fourth organized wave of attacks. More details have begun to emerge. Some are tragic, like a person who lost all of the Bitcoin they stacked for eight years, or the fact that the largest drained address so far held 51 BTC. One potential silver lining is that some believe Bitcoin maximalism is over. Put more poetically, the Church of Bitcoin is being dismantled before our eyes. Others are more pessimistic, predicting the Church will continue, much smaller and even more stupidly fanatical.
Coinkite’s emergency firmware hotfix patches the original entropy flaw but introduced a new bug that can brick devices. White hats began draining vulnerable Coldcards preemptively to hold funds for their owners, which Bitinsurance CEO Chris Seedor admitted he was conflicted about and Pledditor reckoned would age very poorly. Pledditor also floated a theory that Coinkite created fake employee accounts to make the firmware appear more thoroughly reviewed than it was.
Some of the mainstream press, meanwhile, used the story to attack Bitcoin itself. Much more useful was Samson Mow’s advice for victims.
Self-custody itself became a point of debate. Willy Woo, citing River’s 2025 report, pointed out that more coins have been lost to self-custody than to centralized exchanges. Lorenzo Valente declared that “the self custodial hardware space is a disaster at this point and creates more bad rep for the industry than anything else.” Mert Mumtaz stated simply, “self-custody is the entire point of crypto.” Pledditor echoed a point Tarun Chitra made in a Bitcoin.com News interview recently about how closed source, institutional products could be more vulnerable in the long run, saying that “sentiment could easily flip the other way (self custody being seen as safer than ETFs) if next quarter Kimi hacks a major bitcoin custodian.”
Still, it’s likely in the short term that self-custody will decrease. The market appears to be drawing the same conclusion. Eric Balchunas noted U.S. spot Bitcoin ETFs have seen inflows every single day since the hack, totaling $620 million.
Speaking of people who don’t hold their own coins, Strategy sold another 1,638 BTC, prompting Michael Saylor to clarify that “Strategy is a public company, not my wallet” and that he has never sold one satoshi of his personal stack. DonAlt was unmoved, describing a man busy buying cycle highs and selling cycle lows with other people’s money. Mr. Saylor then posted a remix of the Q2 earnings call, something so cringe it must be master trolling. Trump Media might also be using the Strategy playbook of buy high and sell low, having moved another 2,628 BTC, about $165 million, to Crypto.com, bringing the estimate of cumulative losses to roughly $555 million.
While we’re on the topic of buying high and selling low, Arthur Hayes bought 1,337 ETH at $1,869 two days after buying and selling ETH for a 5% loss.
Despite all the negative news, Bitcoin has barely budged. It’s important to remember that through Saylor selling, holders getting drained, the AI trade dominating (both on the way up, then down, and now up again), high geopolitical tensions, and sentiment in the gutter, Bitcoin is relatively equanimous.
Bitfinex thinks we haven’t quite bottomed. As stated previously, there are bottoming signs! Wintermute, the venerable crypto-native market maker, plans to trade commodities, crypto ETFs and tokenized stocks pending regulatory approval. When crypto-native market makers diversify away, that is either capitulation or maturation, maybe both.
Hunter Horsley provided the highest-grade hopium of the week, claiming that in eight-plus years in crypto, this is the first time substance has gotten ahead of price. He’s probably right.
There was a great crypto-native debate this week over Ethereum issuance. EIP-8361, authored by Justin Drake and others, would cut staking yield to zero above 50% of ETH staked and roughly halve it to 1% at current levels.
CT (Crypto Twitter) seemed largely against the proposal. Sonya Kim argued the proposal misses what incremental tradfi buyers actually want — yield, even inflationary yield. Another poster pointed out that this proposal is a slap in the face to Tom Lee, Ethereum’s biggest cheerleader. Mippo found it extremely intuitive that solo stakers oppose this, and worried the Ethereum Foundation may not have anticipated it. Vasiliy Shapovalov said that the discourse offers no positive vision for the validator set, whose original design goal was a strong network of hundreds of thousands of individual stakers worldwide.
My favorite take came from Tarun Chitra on the Chopping Block Podcast, who did not hold back his utter disgust: “The proposal reads like shit. It’s like a truly horrendous post… Some of the earlier inflation posts for Ethereum were much better research… This one is like a meme post. I don’t even know why the fuck you put this out. It’s a little embarrassing to be honest.”
That man is a gem. Lorenzo Valente, who doesn’t support this proposal, does believe that, for an L1 to hold SOV properties long term, real inflation probably has to sit below 2%.
In defi, Uniswap is quietly the turnaround story of this cycle among the OG 2021 tokens, with the fee switch live on V4 and tokenized stocks arriving. Pump.fun is looking good too, now generating more revenue than Hyperliquid or Solana. Careful, PUMP is already roughly 100% off its lows. TradeXYZ, whose alignment with Hyperliquid was questioned last week, appears to be answering its critics by buying back HYPE with the HIP-3 fees it has earned. RWA vaults are finding product-market fit, but most on-chain vaults leave users as unsecured creditors at best in a default. This will have to improve in order to scale.
Prediction markets remain one of crypto’s clearest examples of product-market fit. Polymarket, Polymarket US and Kalshi posted a combined $50.6 billion in July volume, an all-time high. Prediction markets are now Robinhood’s biggest segment after options, which probably means those juicy margins incumbents have enjoyed are about to be squeezed.
Tradfi continues to build out its crypto offerings. Franklin Templeton is becoming a “super validator” on Canton. Western Union’s stablecoin remittance card went live. Not everyone is convinced, mind you: Morgan Stanley cut Circle to underweight and slashed its target from $106 to $38 on slower USDC growth.
A few quick hits to close. A new report found that only one in twenty-four legitimate crypto project tokens succeeds, the vast majority going effectively to zero. POAP, after five-plus years, is winding down, one for the NFT-era scrapbook. Sam Blackshear, creator of the Move language underpinning Sui and Aptos, is leaving Mysten Labs for Anthropic to work on defensive security research. An FBI agent stands accused of stealing more than $1 million in crypto he helped seize. It wasn’t his first time.
Finally, a reminder that the physical threat model is real and getting uglier. Two French men in their twenties were reportedly held for fifty-two hours and tortured in London after being seized during a cannabis run.
Stay safe out there.
-David Sencil
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