Marty's Bent

A headline hit the tapes yesterday that should have every freak paying attention. "BlockFills halts withdrawals amid crypto turmoil." The Susquehanna-backed crypto lender suspended client deposits and withdrawals citing recent market volatility. The Chicago-based firm, which serves 2,000 institutional clients and handled $60 billion in 2025 trading, remains open for select trading but is limiting liquidity.

This is a classic story. We've seen this before with FTX, Celsius, BlockFi, and Genesis in the 2020 to 2022 era. And it seems like we're here again, this time with BlockFills. What these companies did was custody bitcoin for retail or institutional investors and then make the cardinal sin of rehypothecating the bitcoin. There's no lender of last resort in bitcoin, and the cardinal sin if you are a custodian is taking your clients' bitcoin and lending it out. With Celsius, Three Arrows Capital, Genesis, and BlockFi, what we saw back in 2021 and 2022 is that these companies were taking user bitcoin deposits and giving them to funds like Three Arrows Capital, in an attempt to get a yield by trading shitcoins. Unfortunately for them, markets turned. The shitcoins did not pump, especially not more than bitcoin did, and they all went bust. When push came to shove and these lenders needed to call back the bitcoin they had lent out, it wasn't there. They had lost it. They had to go back to their clients and say, "Hey, we don't have your bitcoin anymore."

It's yet to be determined whether or not this is what's going on a BlockFills, but halting trading and withdrawals is never a good sign.

If you try to apply TradFi structures and ways of doing things to bitcoin, you are going to get hurt. And this highlights the importance of self custody, which is something I really want to lean into today because after hearing Brian Armstrong on Coinbase's investor call earlier this week, it's time to sound the alarm bell yet again.

Twelve percent of all crypto that exists in the world is custodied at Coinbase. That is abhorrently high. Bitcoin is a peer-to-peer distributed cash system that gives you the ability to be your own bank. The fact that so many individuals and institutions are trusting the custody of their bitcoin with Coinbase is a travesty. I'm not going to say what happened to BlockFills is going to happen to Coinbase, but the fact that they are centrally controlling large swaths of bitcoin and other crypto assets should concern you. You should have at least partial control or on-chain visibility into your bitcoin if you are storing a large amount of wealth in it.

On top of that, Coinbase unexpectedly reported a large quarterly loss, posting EPS of -$2.49 compared to expectations of $0.96. I still can't recommend Coinbase in good faith. I think they're a systemic risk. The way in which they operate, pushing people towards the crypto casino, is deeply immoral. They lack the attention on bitcoin and bitcoin products that bitcoiners deserve.

So what should you be doing? Take custody of your bitcoin. There is a spectrum of options out there from very easy to more complicated but more secure setups. Coldcard lets you do single-sig, air-gapped, private key creation offline. It's the most secure hardware wallet on the market. Bitkey is another hardware wallet as part of a multi-sig quorum where you hold two keys, one on the hardware device and one on your mobile app, with Block holding a key in the cloud. No seed phrases. Very easy to set up. If you're looking for the first step and you're not technically competent, just go buy bitkey.

For financial services, Strike lets you buy, sell, take loans against your bitcoin, get paid in bitcoin, and live on a bitcoin standard through their bill pay feature. River is another great bitcoin-only exchange. Unchained has two-of-three multi-sig vaults where you control two keys and they hold a third as a fail-safe, plus financial services like IRAs and a lending desk. Casa has a similar setup. OnRamp offers multi-institution custody where you don't hold any keys but the keys are split among three different institutions, distributing risk rather than depending on one counterparty.

I highly recommend bitcoin-only services because they are focused on bitcoin, nothing else. They're not going to try and push you to shitcoins. They have a maniacal focus on building the best bitcoin products and services.

One last thing on lending. If you are going to take a bitcoin-backed loan, make sure you're not putting your whole stack into it. BlockFills probably got into the situation they did because prices kept coming down. I would use somewhere around 10% of your stack so that if the price does crash, you're able to top up margin. The opportune time to take out a loan is when the price is lower, not at all-time highs.

It looks like we have the first body from this precipitous fall in the bitcoin price over the last six weeks rising to the surface of the water, and it is BlockFills. Be wary out there, freaks. It's probably not going to be the last body that floats to the surface. If you're worried about the exchange or the counterparty that stores your bitcoin, you have the ability to move it to self custody to make sure you don't get rugged.

The AI Capital Expenditure Boom Lacks Sustainable Business Models

Gary Brode highlighted a concerning trend in today's AI investment landscape, revealing that hyperscaler companies are pouring over $500 billion annually into AI infrastructure without established revenue pathways. This massive capital allocation represents one of the largest speculative investments in modern corporate history, with companies betting their futures on uncertain returns from artificial intelligence capabilities.

The numbers are staggering when you look at OpenAI's trajectory - $125 billion in expected losses over four years while carrying $1.4 trillion in liabilities - Gary Brode

Brode emphasized how this creates systemic risk extending far beyond individual AI companies. Hardware manufacturers like Nvidia and Oracle have become deeply dependent on this continued AI spending spree, making the entire tech sector vulnerable to potential corrections when sustainable business models fail to materialize. The interconnected nature of these investments means that any significant pullback in AI capital expenditure could trigger widespread disruption across multiple technology sectors.

Check out the full podcast here for more on market valuations, semiconductor dependencies, and corporate debt structures.

Headlines of the Day

Senate Banking Works on Crypto Bill to Anchor America as Capital

Goldman Sachs Discloses $1.1 Billion in BlackRock Bitcoin ETF

US Signs Taiwan Trade Deal Cutting Tariffs to 15%

Indiana Committee Passes Bitcoin ETF Access for Retirement

$1 Trillion Wiped from US Stock Market Today

Trump Creates Advisory Committee With Coinbase and Robinhood CEOs

Your Lender Just Watched Bitcoin Drop 45%

Do you know what they did with your collateral while it was falling? Do you know if it's still there?

Celsius customers didn't know either. Neither did BlockFi's. Or FTX's.

Lygos built something different.

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Already have a loan with a custodial lender? Lygos handles the refinance. 0% origination fees, competitive rates, and your bitcoin moves to non-custodial custody. They handle the entire buyout.

No custodians to trust, no withdrawals to freeze. Just cryptographic certainty. Refinance before the next Celsius.

Take the First Step Off the Exchange

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Final thought...

Worst cold I've had in awhile.

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