[Week 7 of 2026] Bitcoin, Budgets, Bonds

Welcome back to Price and Prejudice with a few musings from Week 7 of 2026. Now that the Capital Markets & Investments class at Columbia is in progress, the blog will also reference to some contents from class as well.

Securitizing Bitcoin

We discussed various forms of asset-backed securities (ABS) in class – well here's an article discussing Wall Street's first public bond sale backed by bitcoin loans, a $188 million deal originated by crypto lender Ledn. The structure is quite familiar: pool the loans, tranche the risk, get a rating, and sell it to insurers and fund managers at a higher rate than benchmarks. Except this time, each individual loan is backed by cryptocurrency rather than a house.

S&P, which rated the bonds, flags two issues that distinguish this one from conventional securitization. First is that the track record is thin, since standard ABS analysis relies on long track records of borrower defaults and recovery rates. Ledn has only been around since 2018, and because its borrowers post crypto rather than going through traditional underwriting, there's no borrower credit data to work with.

Perhaps the second is more interesting – the lender Ledn automatically rolls maturing loans into new ones, which means borrowers who don't actively opt out stay enrolled and unpaid interest compounds. In a typical securitization, loan maturity is a natural deleveraging event where the borrower either repays or defaults, and either way the pool's exposure shrinks over time. But an auto-renewal would short-circuit this process and lets risk accumulate quietly. S&P characterizes this as conflict-of-interest, since Ledn earns fees on outstanding loans and therefore would like to keep the pool large.

The Endowment Model

One way to think about universities is that they are asset managers with classrooms attached. This article talks about how Princeton University, which is famously reliant on its endowment to fund operations, adjusts its assumptions for future returns (and therefore future income). A large endowment is what enables no-loan financial aid and less dependence on tuition, but it also means that portfolio swings hit the operating budget directly.

Other funding sources exist, but each comes with its own fine print. The most obvious source is tuition revenue, which depends on the degree of university compensation and overall demand for higher ed. Federal grants can carry non-negligible political risk, and philanthropy depends on donors and markets. Industry partnerships and licensing work better for schools with large engineering footprints (think Stanford or MIT). Of course, the free lunch we have is diversification, but in practice it likely means accepting trade-offs that could weaken the very thing that makes Princeton, Princeton.

Can't Stop, Won't Stop

Why do people buy bonds? We discussed a few reasons in class. Insurance companies and pension funds need predictable cash flows to match their liabilities. Professional fixed income traders would speculate that the Fed has room to cut short-term rates further. And maybe you just like Alphabet and want to enjoy the fuzzy glow of one of the world's largest companies being contractually indebted to you for the next hundred years.

This article is a nice encapsulation of several topics on bonds we covered in class, and a fairly typical example of market participants staring at spreads and thinking they're too tight. The standard read is that investors are being complacent, not adequately compensated for risk ("risk premium") in a world of tariff uncertainty, geopolitical tension, and a wave of AI-related issuance from companies like Oracle and Alphabet. But there's a supply-side story too: companies pulled back on long-dated issuance when rates rose, since they did not want to lock in high rates. Of course, this is deeply tied to their outlook for the economy and their forecast of subsequent interest rates, which is precisely what makes these things so hard to predict.