Quetzal.btc

Bitcoin capital markets, FTW!

Good morning, big week ahead☀️

A deeper dive into bond dynamics. We have about 2 billion in Bitcoin capacity that we can deploy in coming months. The rough math is that we can sustain 3x the market cap of STX for BTC deployed. So far we’ve used very little capacity, like < 1,000 BTC. Why? Because we’re in the bootstrapping stage, what matters in these early days is (a) institutional custody integrations, (b) onboarding large institutional clients, but not deploying too much of their capital. For now. First, you establish the distribution network and then scale it out. Let the market absorb the information that BTC native yield is real. Capacity grows with Stacks' growth. Two years ago, at the height of interest in BTC DeFi, we could support 15 billion in BTC deployed. We’ll get back there and more. I see this as a 100 billion-plus market that we’re slowly unlocking. That’d be just ~6.4% of BTC deployed. Ethereum has 36% staked. So these numbers are conservative. What I’m most excited about is that, when this plays out as designed, it finally opens on-chain flows for BTC. We fulfill the decades-old dream of bitcoin culture: to make BTC more than just a store of value. BTC starts moving for trading, lending, yield, etc., on-chain on the Bitcoin execution layer. A circular BTC economy with gas fee revenue starts to emerge. People forget how large BTC already is. When it moves, it moves in size. Then we focus on privacy and post-quantum and overcome the upcoming BTC challenges. That’s the long-term open secret plan. For now, the first dominoes are the Bitcoin bonds and how we launch them. Back to the 2 billion capacity: we will be releasing some of it soon in bond 3. Every bond results in STX being purchased and locked on-chain as a capacity limiter for BTC staking yield. As this dynamic plays out, the world starts to notice our work. Doubts about the feasibility of bitcoin capital markets start to fade. The machine starts humming. Forward!

Good morning, planning our next 2-week sprint. Excited about all we can get done!

Bitcoin’s execution layer. Increasingly convinced that there will likely be one main execution layer for Bitcoin. Game theory of staking dynamics, combined with liquidity concentration, points to this. Staking dynamics: Ethereum has one major source of low-risk yield: the consensus yield. Even though you could earn higher-risk, higher-return yield elsewhere, most capital goes to the lowest-risk option: the effective ETH fed rate. Multiple on-chain Bitcoin yield options would converge on the lowest-risk yield that is meaningful enough. Offering higher yield with added risk can’t lure that capital away. The Bitcoin layer that can offer the effective BTC fed rate yield at scale is the one with the largest market cap and economy size. Liquidity concentration: We saw this with Solana vs. Ethereum L2s. A single execution chain offers better UX, and everyone benefits from concentrated liquidity rather than fragmented liquidity and assets spread across multiple L2s (the various Ethereum ones). We can try to put a valuation framework for what Bitcoin’s execution layer should be worth (an exercise for another post). Right now, I’m just making the point that the probability of getting N different execution layers is very low (unstable equilibrium and bad UX for users). Either one major execution layer exists where, say, 10-30% of BTC supply is actively deployed, or Bitcoin remains a passive asset. I’m an optimist by nature; I believe that we’ll get one major Bitcoin execution layer.

Top 5 things I’m doing in the first 30 days as CEO: (1) Expand the institutional BD machine. Bitcoin bonds are seeing increased demand. We want to shorten the time from first interest to going live. Speed matters. (2) Simplified leadership structure. Empower our rockstars and clarify what decisions I make. I’ll hear all input and then make quick decisions. We’ll move like a startup on fire. (3) Publish a 2-year roadmap, beyond bitcoin capital markets. How institutional-grade BTC privacy and post-quantum fit into our roadmap. We’re the frontier of bitcoin. (4) Public comms & investor meetings. I’m meeting large holders 1-1 and updating them on the latest thesis and traction. First public holders update call within 30 days. (5) Clarify value accrual. We’ll assign all IP to the endowment, which has no shareholders, making it crystal clear that all value accrues to STX. Publish value accrual mechanics: why bitcoin bonds fuel growth. I’ve been in this industry for 13 years, and I’m coming back at the helm as CEO. Building on the frontier of Bitcoin is my dream job. We’ll be building in public. Anyone can join us. The ticker is $STX.

Strong Q3 progress for STX. As the incoming CEO of Stacks Labs, I’ll start sharing frequent updates and hosting quarterly update calls. Quick summary typed here as we release a detailed Q3 blog later (speed matters). - There has been a 72.15% increase in BTC yield over the last 4 cycles. This is a result of SIP-45 activation that attracted more miners, increased mining efficiency, and strengthened STX/BTC ratio. - Locked STX increased from 392M (at the time of the Satoshi One upgrade) to 448M over 4 cycles. The 20M jump right before Bitcoin Bond 1 went live was especially interesting as it shows the economic loop working. - Anchorage announced support for Bitcoin Bonds, along with Fireblocks and Fordefi. Distribution to institutional clients through custody providers they already use is key. - Bond 1 sold out for capacity, with large institutions like 21Shares, UTXO Management, HashKey, etc. participating. - New signers like Ankr, The Tie, and HashKey Cloud came online — institutional infra providers for institutional-grade Bitcoin capital markets. - Satoshi One upgrade was successfully live. With 99.98% uptime. One small network delay as signers upgraded, but the best-executed network upgrade yet. The economic loop in (1) and (2) is especially interesting. BTC yield is increasing while bitcoin staking capacity demand (STX needed) is going up as well. As more BTC gets deployed in upcoming bonds, things could get really interesting. A lot more happened in Q3, but these were some highlights for me. We’ll release a detailed Q3 update blog soon. My focus is on capital flows, growth, and execution speed. Forward! (Typed with two thumbs on a Sat in Korea.) — Muneeb