🛡️ Cryptography’s AI Problem
🗞️ Stacks in Q3 2026
💰 Yield Recap
📈 Weekly Market Review

This week, a reality about AI, quantum and cryptography hit me.

AI is advancing the threat to cryptography in two directions at once. It is accelerating mathematical discovery, which could potentially uncover shortcuts for breaking cryptographic systems, while also helping quantum computers become more reliable and capable. Neither is a threat today, but both are a wake-up call to prepare early.

On the flip side, Stacks published its Q3 recap this week. I’m proud to see Hermetica continue to show up in the numbers, with hBTC reaching $4M in TVL and USDh delivering an average 8% APY during the quarter. The report also highlights our Clear Street integration, bringing direct institutional access to listed securities into Stacks ecosystem.

Cryptography is facing pressure from AI in two directions.

AI is accelerating mathematical research and helping improve quantum computing efficiency.

Recently, OpenAI released hundreds of AI-generated mathematical manuscripts, including work on problems that have challenged mathematicians for decades. The progress raises questions about how quickly our understanding of difficult mathematical problems could change.

Google also published research suggesting that breaking Bitcoin's elliptic-curve cryptography could require significantly fewer quantum computing resources than previously estimated.

Bitcoin cannot replace its cryptography overnight. New signature schemes require extensive research and network coordination. A substantial share of Bitcoin's supply is held in addresses with exposed public keys, making those coins potentially vulnerable to quantum attacks.

Proposals such as BIP 360 are already exploring how Bitcoin might adapt. For now, avoid unnecessary address reuse, keep wallet software updated, and follow post-quantum security research. We'll continue covering these developments in our publications.

Be cautious of products marketed as quantum-safe, too. Immature cryptographic solutions are risky.

There is no reason to panic, but there is reason to prepare.

BTCFi on Stacks moved a step forward in Q3.

Stacks closed the quarter with 1.62M cumulative wallets, while weekly DEX volume reached a 12-month high of $16.7M. Increased participation translated into more activity across trading, borrowing, and yield products on Stacks.

Hermetica contributed to this momentum. Stacks’ Q3 report highlights hBTC reaching $4M in TVL and USDh delivering an average 8% APY over the quarter. Our Clear Street integration also brought access to listed securities through a U.S. broker-dealer that is a FINRA and SIPC member, extending institutional market infrastructure into the ecosystem.

The full Q3 recap is live. Read it for a closer look at the quarter's developments.

This week's APYs are in.

hBTC: 1.0%
USDh: 8.0%

A good week for your balances.

Bitcoin briefly recovered above $84,000 early this week before falling below $80,000, its lowest level in nearly a month. BTC has since rebounded to around $82,368, slightly below last week’s $83,004. On-chain activity shows buyers stepping in at lower prices, while holders continue to sell into recoveries, keeping BTC within its recent range.

The selloff accelerated after September CPI rose 3.7% year-on-year, up from 3.4% in August, increasing the risk that the Fed keeps rates higher for longer. Technology and AI-related equities sold off alongside Bitcoin, while U.S. spot Bitcoin ETFs recorded $261.4M of outflows on Wednesday, reducing spot buying demand.

Data Summary:

Simple Moving Averages (SMAs) in Figure 1:

Bitcoin is trading around $82,368, below its 7-day SMA at $82,582 and 30-day SMA at $83,431. Immediate support sits near $81,500, around the average U.S. spot Bitcoin ETF cost basis, followed by $80,000, where buyers stepped in during this week’s selloff. Deeper support remains at the 360-day SMA near $77,939.

Resistance sits at $82,582, followed by $83,431 and $85,000, with stronger resistance near September’s highs around $87,500. Reclaiming the 30-day SMA at $83,431 would improve the near-term trend, while a sustained move above $85,000 would extend the recovery. A move below $81,500 would make $80,000 the next support level, followed by the 360-day SMA near $77,939.

Net outflows totaled $146.19M this week.

U.S. spot Bitcoin ETF outflows eased considerably from $681.10M last week. Cumulative net inflows declined to $56.96B from $57.11B, while total net assets fell slightly from $105.84B to $105.71B. October net outflows now total $534.78M, following $2.65B of inflows in September.

DVOL rose to 37.33% from 36.70% last week, even as Bitcoin fell below $80,000 and U.S. inflation accelerated. The increase was modest, and DVOL remains near the lower end of its one-year range. Options markets are therefore pricing more uncertainty than last week, but not a sustained period of much larger Bitcoin price swings.

Short-dated volatility also remains low, with October 23 at-the-money implied volatility near 29-30%, compared with roughly 32% for October 30 and 36% for December. October puts still trade at a premium to comparable calls, showing that investors are paying more to protect against further downside.

Bitcoin’s equal-weighted futures basis rose to 6.09% from 5.95% last week. The increase was concentrated in shorter-dated contracts, with October 30 at 6.86%, October 23 at 6.80%, and November 6 at 6.38%. Longer-dated contracts remain lower, around 5.4%-5.8%.

Traders are paying a larger premium for near-term Bitcoin futures than for contracts further out, showing that futures demand has strengthened mainly at the front of the curve rather than across the market. The expiry of the October 16 contract also affects the weekly average, so the increase does not represent a broad rise in leveraged positioning.

U.S. inflation accelerated, but Treasury yields moved lower anyway. Headline CPI rose to 3.7% year-on-year from 3.4%, while producer prices increased 1.3% month-on-month, their largest monthly rise since March 2022. Normally that would put upward pressure on yields. Instead, the 10-year Treasury fell from 5.24% last Friday to 5.10% as investors moved into government bonds during a broader selloff in technology and AI-related assets.

The shift was driven partly by growing concern around the financing of the AI infrastructure boom. CoreWeave’s 2032 bonds fell below 80 cents on the dollar, pushing yields above 15%, as investors questioned how much debt the sector can absorb. At the same time, Brent remained near $106, keeping energy inflation elevated. The result is an unusual mix: inflation remains firm, but demand for safety is pulling government bond yields lower.

Bitcoin did not benefit from the decline in yields. BTC traded below $80,000 while spot ETF flows remained negative, because yields were falling for the wrong reason for risk assets: investors were moving into Treasuries for safety, not because inflation was easing or the Fed was becoming more accommodative.