AI-Focused Hedge Fund Forced to Sell: Last week was eventful for equity markets. Over the past few years, 25-year-old hedge fund manager Leopold Aschenbrenner has developed a strong following after his fund, Situational Awareness LP, generated substantial returns, mainly from AI-related stocks. At the end of May, the fund managed roughly $20 billion, making it one of the world's largest hedge funds by assets under management.
During July, however, several of the fund's largest positions, particularly in AI-related stocks, fell sharply. This resulted in margin calls. A margin call can occur when a fund invests with borrowed money and uses its assets, often the same or similar equities, as collateral. If the value of that collateral falls below a required level, lenders, typically investment banks, may demand additional collateral. If the borrower cannot provide it, the lenders can force the fund to sell its positions.
Following the margin calls, Situational Awareness LP sold most of its positions in publicly listed companies to another major hedge fund, Citadel. The sale created volatility and uncertainty in equity markets, as many of the stocks held by Situational Awareness LP initially fell sharply before recovering after the fund completed its sales. However, the spillover into the crypto market was limited.
Coldcard Wallet Vulnerability Leads to Bitcoin Theft: Last week and at the beginning of this week, hackers reportedly drained thousands of Bitcoin addresses secured with Coldcard, a Bitcoin-only hardware wallet.
A hardware wallet stores the private key needed to move funds offline on a physical device. In this case, however, attackers discovered that some recovery seed phrases had been generated predictably. A seed phrase acts as a backup that can restore access to funds if the hardware wallet is lost. Coldcard has released an update intended to address the issue and recommends that users move their Bitcoin to newly generated addresses. At the time of writing, an estimated approximately 1,816 Bitcoin, worth $117.6 million, have been stolen through this method.
Hardware wallets have long been considered one of the safest ways to hold digital assets outside a centralized platform, making this a notable and unexpected attack. Fortunately, the incident did not affect one of the industry's largest hardware wallet providers, as Coldcard is still a relatively small provider of hardware wallets.
Circle Acquires IBM’s Blockchain Patents: Circle, the issuer of USDC, the second-largest stablecoin, announced last week that it had acquired nearly 1,000 patents from IBM. The patents cover blockchain, financial services, insurance, and several other sectors. The acquisition makes Circle the world’s largest holder of blockchain-related patents. The financial terms of the transaction were not disclosed.
IBM has previously been active in blockchain technology. Among other initiatives, it partnered with Danish shipping group Maersk to develop TradeLens, a blockchain-based logistics platform that was later shut down. IBM’s decision to sell its blockchain patent portfolio suggests that the technology may no longer be a strategic priority for the company.
