Weekly Roundup 07/31/26 (Situational Awareness collapse, Coldcard exploit, latest on CLARITY, Visions of Bitcoin 8 years on) (EP.732)

Leopold Aschenbrenner's AI-focused hedge fund collapsed after Citadel announced the Fed would hike rates, triggering margin calls across a portfolio that had grown from $500 million raised to roughly $40 to $45 billion in assets at 4x leverage. Aschenbrenner owned double-digit percentages of the float in multiple AI pure-play stocks, making orderly liquidation impossible without moving markets, while simultaneous shorts on software and semiconductors rallied against him. His month-to-date performance hit minus 67 percent, though year-to-date net remained plus 80 percent after the blow-up. He still holds approximately $5 billion in Anthropic private equity, a deal with Greenoaks and Sequoia to sell that position was available but he chose to sell public holdings instead, and he subsequently told investors the fund carries no margin liquidation risk. All LPs remain up lifetime to date, and the prediction offered is that he likely survives and may raise capital again as a private markets investor.

Nick Carter noted that the Situational Awareness manifesto published in 2024 has largely proven correct so far, though AI stocks have sold off significantly over the past month partly because a Chinese model called Kimmy was seen as a second DeepSeek moment. Carter argued the concern that AI labs will suffer margin impairment from cheaper distilled models is probably wrong given OpenAI's healthy revenue numbers.

Over 600 and possibly over 1,000 bitcoins were lost due to a bad entropy bug in Coldcard hardware wallets affecting devices set up between approximately 2021 and 2024 because of a misconfigured RNG source. Over 1,000 bitcoin were swept in a single 40-minute window on one night. Users who performed manual dice-roll entropy during setup may not have been affected, and those on older firmware versions are also likely not at risk. The exploit may have been triggered by a backend licensing scheme change after Passport began building on Coldcard. NVK ran AI-based audits of the codebase and did not catch the vulnerability, and NVK suggested attackers are likely using new AI tools to find such flaws, noting that AI currently favors attackers over defenders because security researchers face restrictions from AI labs on certain queries. Coldcard is not believed to be well-capitalized and may cease to exist with no recourse for victims. Multi-signature setups combining hardware wallets from multiple vendors, such as CASA arrangements using Coldcard, Ledger, and Trezor together, are described as providing meaningfully better protection than any single device.

The CLARITY Act sits at 24 percent on Polymarket as of the episode. Senators Tom Tillis and Ruben Gallego rewrote the ethics conflict of interest section and sent it to the White House, with that provision and the role of state attorneys general in enforcement remaining the main sticking points. One speaker believes 24 percent is too low while the other is aligned with the market. SEC chairman Paul Atkins stated he is ready to institute rulemaking for the crypto industry if the CLARITY Act fails, and the speakers noted that rulemaking enabling major financial services firms to launch new business lines would be difficult to roll back politically. Democrats feeling emboldened by favorable polls are described as more willing to oppose crypto legislation to align with their base.

Strategy sold another $544.5 million of common stock, bringing its cash reserve to $3.75 billion, and now holds 843,775 bitcoins. Strategy also bought back $25 million of STRC preferred shares, though STRC trades stubbornly at $89 with vulture funds described as circling it and a grand bargain restructuring deal expected within weeks that may include some equity for STRC holders.

Robinhood posted record quarterly revenue of $1.3 billion, with prediction market event contracts earning $156 million against $100 million from crypto, marking the first time Robinhood's prediction market business out-earned both crypto and spot equities. Circle acquired IBM's blockchain patent portfolio of 680 patent families and over 1,000 issued patents, making Circle the largest blockchain patent holder in the United States, in what the speakers described as likely a defensive posture given Circle has probably faced patent litigation previously.

The Visions of Bitcoin post co-written with Haseeb turned eight years old, having argued in 2018 that Bitcoin had shifted from payments network to censorship-resistant e-gold. The speakers noted the dominant vision today is Bitcoin as an uncorrelated financial asset, though they observe Bitcoin is actually rather correlated in practice. Its roles as a reserve currency for crypto, a programmable shared database, and a cheap payments network are now described as negligible. Bitcoin is considered effectively impossible to change today absent an enormous coordinated effort, with post-quantum resistance described as likely the only meaningful change Bitcoin will ever make going forward.